The rising influence of interest rate decisions on gold prices

  • During 2018, gold prices were largely influenced by the direction of the dollar, says World Gold Council
  • However, interest rate changes, in conjunction with market uncertainty, have once again taken the front seat

An analysis by the World Gold Council (WGC) shows that interest rate decisions by the US Federal Reserve have become more influential in driving gold prices.

During 2018, the performance of gold was largely influenced by the direction of the dollar. However, interest rate changes, in conjunction with market uncertainty, have once again taken the front seat, WGC said in report on 19 March.

“Our previous research highlighted the fact that interest rates have greater impact on asset price performance, including gold, when there is a shift in policy stance (from neutral to tightening or vice versa). Our analysis of gold’s performance in January suggests that, indeed, expectations of interest rates are starting to play a more influential role than they did in 2018," it said.

That said, the immediate impact of transition in policy from tightening to neutral on gold’s performance is not clear cut, added WGC. 

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