Rising Interest Rates Bullish Or Bearish For Gold?

Influenced by changes in real short-term rates and spreads

Below is an excerpt from a commentary originally posted at www.speculative-investor.com on March 14, 2010.

Interest rates trended upward during the gold bull market of the 1970s in parallel with a generally high level of inflation fear, leading to the belief in some quarters that gold bull markets always go hand-in-hand with rising interest rates and inflation expectations.

However, this belief was proved wrong over the past decade in that gold trended upward while interest rates and inflation expectations either oscillated near 40-year lows or had a downward bias. It was a strange decade in that confidence in the major currencies was clearly on the decline (as indicated by gold's performance), and yet inflation expectations remained at relatively low levels throughout.

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