The relationship between the gold price  interest rates, currency exchange rates and inflation, has long been confusing to many casual observers. With Gold and Silver prices at around $2,016, and $25.13 respectively, many are confused why these precious metals prices continue to move higher, when “conventional wisdom” tells them they should be falling.

Often, gold, interest rates, and the dollar may appear to be reacting to each other, but in reality, they are all reacting to  separate, independent variables. External factors such as fiscal policies, geopolitical events, economic and social problems in various countries, as well as international political and financial developments can affect all these factors simultaneously. It is essential to understand what is driving other markets to understand how it will affect gold and silver prices.

Historically, real interest rates have had varying impacts on gold prices. During periods of negative real interest rates, gold prices have tended to rise, while positive real interest rates have seen gold prices moving sideways or weak. However, it’s crucial to examine why interest rates are changing to determine their effect on gold prices. If the Fed successfully controls inflation without causing a recession, that could be negative for gold. On the other hand, if the Fed fails, it would be positive for gold.

The interplay between gold prices and the US dollar is another intricate matter. While a beefy dollar can often throw a wet blanket on gold prices, this isn’t a hard and fast rule. Similarly, the dance between inflation and gold prices isn’t always in perfect synchrony. The key is to observe, understand, and interpret these complex relationships within a boarder economic environment,