Gold price vs rates shows rally catalyst 'already in place'
By GCRU Gold News on Wednesday, June 4 2014, 16:22 - Permalink
A number of gold market analysts have made the case that the one major factor influencing the price of gold is US inflation-adjusted interest rates and that the correlation is so strong that the gold price can be used as a predictor of rates, serving as an early warning system on both the direction and magnitude of moves.
The underlying reason for the relationship is that as yields rise, the opportunity costs of holding gold increases because the metal is not income producing. Higher rates also boost the value of the dollar which usually move in the opposite direction of the gold price.