Gold Under Pressure from Higher Interest Rates

The gold market is facing a fresh test from higher interest rates after the Federal Reserve raised its policy rate by 25 basis points to 3.75%-4%, its first hike since July 2023.

This move strengthened the dollar and pushed Treasury yields higher, putting pressure on non-yielding gold, which remains substantially higher over the past year at a 17% gain.

Rick Kanda, managing director at The Gold Bullion Company, pointed to the opportunity cost of holding an asset that generates no income when rates and bond yields are rising.

'Gold doesn’t generate interest, so when interest rates and bond yields rise, investors are more keen to hold yield-bearing assets as opposed to gold,' he said.