Gold increases in attractiveness when interest rates are low, as the opportunity cost of leaving money in the metal -- which yields no inherent investment return -- is low. This is illustrated by our Chart of the Week 1 and Chart of the Week 2 this week, as is the fact that gold's long-term correlation to the dollar is limited. Gold offers portfolio diversification rather than a hedge against dollar depreciation. While the value of the dollar-denominated price of gold depends largely on real (inflation-adjusted) interest rates in the United States, the dollar's value hinges less on the absolute level of real US interest rates than on how these rates compare with those of other countries.
Source: Oxford Analytica