The relationship between the price of gold and interest rates

Degussa/Thorsten Polleit/4-8-2021

photo of stacks of gold and silver coins

“US real short-term yields, calculated on the basis of CPI, averaged minus 0.40 percent in the period January 2000 to February 2021. From August 2008 until today, the average was minus 1.2 percent. Given the grave problems in the international financial architecture and economic system, chances are that short-term interest rates in real terms will remain negative or fall even further into negative territory. This, in turn, is a strong argument for holding physical gold and silver as part of your portfolio. At current prices, holding physical gold and silver is a great way to reduce your portfolio risks while contributing to a higher portfolio return.”

USAGOLD note: Polleit argues, as we do, that the thing investors should watch is not just the direction of yields, but the actual real rate of return. When doing that, however, we should keep in mind that the inflation rate posted by the Bureau of Labor Statistics does not necessarily square with the real, on the ground cost of living experienced by most Americans. As such the current real rate of return generally referenced in economic circles is probably understated and lends even more credibility to Polleit’s argument for holding gold and silver in one’s portfolio.

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