Do not talk about gold without looking at interest rates. It won’t lead to a proper discussion

Up to now, I have repeated, “Do not base entries on fundamentals.” Still, if you’re handling gold, there are background factors you should at least know. That is “interest rates.”Interest rates are considered one of the most important background factors that significantly affect gold prices.

Trading gold while completely ignoring interest rates is like setting sail without knowing the weather. Even if you don’t use it as an entry reason, it’s valuable to understand it as a background.

This time, I’ll explain the relationship between interest rates and gold as simply as possible. Not a difficult economic theory, but the key points traders should know.

Why do interest rates affect gold

Gold has a major characteristic.Gold does not generate interestwhen you hold it. Stocks have dividends, bonds have interest, but gold is just a metal and does not produce anything just by holding it.

This is where interest rates come into play. When rates are high, investors are attracted to “assets that generate interest (such as bonds).” If there are assets that pay interest, the reason to hold gold, which does not generate interest, becomes weaker. Therefore,when interest rates rise, gold tends to become relatively less attractive and is more likely to be soldIt is said to have this tendency.

Conversely, when rates are low. The appeal of interest-bearing assets decreases, so people may think, “If I won’t get interest anyway, gold is fine too.” Therefore,when interest rates fall, gold tends to be bought moreIt is said to have this tendency. This is the basic relationship between interest rates and gold.

The perspective of “real interest rates”