Higher Interest Rates Won't Change Gold's Long-Term Outlook

Nomi Prins, an author and international political economy analyst, spoke to Mike Maharrey on Money Metals Weekly Market Wrap about the impact of higher interest rates on gold. Prins emphasized that a rate hike does not change gold's long-term outlook.

Gold had reached all-time highs near $5,500 an ounce before the Iran war but settled into a healthy range around $4,300 to $4,400 after the conflict began. This consolidation reflects durable underlying demand for gold as a physical monetary asset outside the financial system.

The Fed's move was influenced by oil prices above $100 per barrel, which cannot be controlled by interest rates. Prins noted that if oil returns to around $80 or $90 on a geopolitical resolution, inflation readings could decline due to lower energy costs, not because of higher interest rates.

Central banks continue to buy gold as a reserve asset and diversification tool, despite rising Treasury yields. The People's Bank of China is holding Treasury bonds at all-time lows while continuing to buy gold. Prins argued that gold has doubled in value over the last two years and offers price appreciation, purchasing-power preservation, and protection against physical supply scarcity.

The U.S. government's use of the dollar as a foreign-policy tool accelerates the debasement trade, but other countries have a clear counter-response by buying more gold. Prins said that the reaction to the freezing and sanctioning of Russian assets after Russia invaded Ukraine helped accelerate central-bank gold accumulation.