Wednesday, February 20, 2013

Why gold is falling

gold vs tips

According to this article, gold is similar to a bond in some ways.  When interest rates drop, the price goes higher.  When interest rates rise, the price drops.  So a falling gold price could be an indicator of rising interest rates.

Graph of 10-Year Treasury Inflation-Indexed Security, Constant Maturity

Source:  http://research.stlouisfed.org/fred2/series/DFII10/
Have interest rates finally hit a bottom?  It's too hard to tell with negative interest rates, but they hit an all-time low at -0.87% on 12/10/2012, and have been slowly rising ever since.  They might even hit zero by mid-summer. Will they keep rising after that?

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