Popular opinion is that interest rate hikes are bearish for the price of gold. The comparison of the path of interest rates and the yellow metal suggests otherwiseaccording to the strategists of the bank ANZ.
Gold will stand firm
“Since 1970 the correlation has only been about 28% and is not considered significant. When broken down into rate hike cycles, only once has gold finished lower. In fact, some periods have seen gold rise 30-40%“.
“Gold performs best when inflation is rising, rates are falling and the US dollar is weak. Rarely do these factors coincide, making the fair value of gold difficult to assess. Our gold price valuation model suggests that it is currently undervalued“.
“Persistently high inflation and a weaker dollar could offset the drop in gold prices from higher interest rates. Combined with the safe haven demand caused by geopolitical tension, gold can stand firm“.
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
