Why Gold Prices Respond to Interest Rates and the Dollar

Gold pays no interest, so its appeal is closely tied to what investors can earn elsewhere. When real interest rates, meaning yields after inflation, fall, holding gold becomes relatively more attractive. When they rise, it can weigh on prices. The US dollar matters because gold is priced globally in dollars. A stronger dollar tends to make gold costlier for buyers using other currencies, which can dampen demand, while a weaker dollar often has the opposite effect. Safe-haven demand during periods of uncertainty, central bank purchases and seasonal buying in India around festivals and weddings add further layers. For Indian investors, the rupee exchange rate and import duties also shape local prices. This article is informational and does not recommend any trade.