Which will influence gold spot movements more, inflation or rising interest rates?

Roswell Crash Survivor

Roswell Crash Survivor

Well-Known Member
Silver Stacker
Inflation in durable goods should be noticeable to most by now, filtering through the monthly/quarterly statistics.

Major central banks (U.S Fed, Bank of England et al.) are putting up signals that they intend to raise interest rates to dampen inflation; whether up you believe they can end actually afford to end Zero Interest Rate Policy (ZIRP), the signals are up and the broader market sees them.

Underlying causes of 2021/22 inflation - Proposed
Stimulus/relief dollars and euros 'high' hitting the economic bloodstream
High fuel demand / Power shortages <<both a symptom and a cause
Disruptions to manufacturing
Supply chain inadequacies

Gold (both physical and paper/account) is marketed as an inflation hedge, but is also less attractive in a high(er) interest rate environment.

Which do we expect will influence spot gold more over the next 6-12 months?
 
I don't think half or even a 3% increase will make much difference to either the gold price or inflation problem. However those with lots of savings might start pulling out their money from stocks and maybe even gold once it hits 5%.

So to answer the question I think higher interest rates of 5% or more could cause gold to stall or even fall. But really, at ZIRP or 1% to 4% increase in rates won't make much difference. A retiree might think getting 5% on his cash is a safer bet than trying to squeeze a profit out of blob of gold particularly the way spot price has been jumping all over the place lately.

For the next 6 to 12 Months I will bet on inflation having more influence on the POG going up. Interest rates won't be going too high too quick, might even take years. That would be my bet and that's all it would be as anything can happen.
 
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People are still believing the governmint reassurances..."it's only transitory" :rolleyes: despite seeing rising prices everywhere everyday o_O
Jokes 82.jpg
At this stage of the game I'd rather have gold (and/or silver) in the hand than paper or electronic promises :cool:
 
REDBACK said:
From a practical point of view I never really understood how the two are not intertwined.
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It depends upon what theory you apply to explain your practical observations of the monetary system. So Austrians believe that inflating the supply of money will create inflation, whereas Keynesians believe it won't because they believe that increasing demand creates inflation.

What is probably true is that increasing the supply of money at the same time as increasing demand will lead to price inflation.
 
"it's only transitory" :rolleyes:
gold convertability had been temporarily suspended, half a century and counting
its been for EON
it is for EON liar, trust on paper is not it
there is trust in the paper by printing on it, that is how they give you the word trust
 
The money/inflation thing is overrated unless you're talking longer timespans. The fact of the matter is simply that USA and most world stock markets have been great great GREAT since the COVID crash, so there just isn't a lot of interest in PMs. Why would you buy any big amount of gold when you can make 5x or 10x the returns in equities right now?

I offloaded half my silver earlier this year (price was up and it's getting to be too much physical space), and luckily I did that before the dip. I have been picking up gold (always am, mostly sovs... barely ever sell my gold) and expect it to go on another bull run whenever the stock market normalizes or dips. That could be in a year or in 10 years.

The money supply could double tomorrow, but gold spot won't budge much (in the short term) unless there is demand from banks/govts/people to buy it. That won't happen if the markets are also looking like better ways to gain and speculate.

I always tell people that gold supply is constant, so it keeps up roughly with global inflation and money supply. Gold doesn't really go up... money goes down. Gold just sits there. The gold ounce to buy a suit/toga, ounces to buy a decent car/chariot, amount for an average house, etc will remain roughly the same over very long timelines. BUT, we have to realize that it doesn't correlate in real time. Gold spot is not a day-to-day tracker of the inflation index or total fiat money on the streets and in accounts. Gold price can lag years - or even a decade or more - behind economy and govt money printing rates sometimes. Gold is very rarely volatile enough to be a good "flip" type of investment (and when it is, so is basically everything else: real estate, stocks, etc). It is merely a store of wealth that is unmatched over time, but that's all it is.

Inflation and money supply always keeps gold going sideways/up a bit since gold is scarce and can't be made/produced quickly. Nothing can really drop gold's value in the long term unless the whole world gave up on it or supply exploded somehow (neither will happen in our lifetime), but the demand for buying gold is what really puts things into high gear. That is the same for stocks or Beanie Babies or basically anything. That demand hasn't happened for gold lately (not since 2008 Obama crash), so it just crawls along storing wealth. Keep buying and don't sweat it or try to make too much sense of it :)
 
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I’ve been working on a gold/silver/AUD ratio looking for the best way to switch between gold, silver and the US dollar. Ad it stands today, gold is the best buy.
 
SlyGuy said:
Inflation and money supply always keeps gold going sideways/up a bit since gold is scarce and can't be made/produced quickly. Nothing can really drop gold's value in the long term unless the whole world gave up on it or supply exploded somehow (neither will happen in our lifetime), but the demand for buying gold is what really puts things into high gear. That is the same for stocks or Beanie Babies or basically anything. That demand hasn't happened for gold lately (not since 2008 Obama crash), so it just crawls along storing wealth. Keep buying and don't sweat it or try to make too much sense of it :)
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Or it doesn't do any of that.

inflation-adjusted-gold-price.png


Moral of the story? Don't go heavy into gold expecting it to protect your wealth from inflation.
 
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I would say the MASSIVE bull flag forming in gold will move it more than anything.
Chart is looking awesome!

It might explain why the banks have been hoarding gold in record amounts lately.
 
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Inflation has many tentacles. It affects the forex markets, affects exports negatively, makes work force cheaper (salaries will be worth less), decays purchase power, increases the costs of energy and fuels, increases the cost of food.

If all these happen, then gold's price starts going up. But sadly, gold doesn't protect well from hyperinflation: check the Venezuela scenario (gold didn't go as high in price as the currency went down).

If hyperinflation occurs, gold might not save you.

Currently there are rumors about "Turkey asking its citizens to hand over their gold", which I believe is fake news. Most probably people are selling their gold in order to survive the economic crisis, so it is not being taken away from them by force.
If you know more about this, please share...
 
TreasureHunter said:
Inflation has many tentacles. It affects the forex markets, affects exports negatively, makes work force cheaper (salaries will be worth less), decays purchase power, increases the costs of energy and fuels, increases the cost of food.

If all these happen, then gold's price starts going up. But sadly, gold doesn't protect well from hyperinflation: check the Venezuela scenario (gold didn't go as high in price as the currency went down).

If hyperinflation occurs, gold might not save you.

Currently there are rumors about "Turkey asking its citizens to hand over their gold", which I believe is fake news. Most probably people are selling their gold in order to survive the economic crisis, so it is not being taken away from them by force.
If you know more about this, please share...
Click to expand...
https://www.reuters.com/markets/asi...ld-savings-scheme-weekend-sources-2022-02-08/
Turkey finance minister to announce gold savings scheme on weekend- sources
they tried it sometime back
 
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