 |
| Gold Prices Follow Interest Rate |
When interest rates rise, there is a great effort to keep the money on deposit than gold which does not earn interest (non-interest-bearing). This will put pressure on the gold price. Conversely, when interest rates fall, the price of gold will tend to rise.
In theory, if the short-term interest rates rise, the price of gold down. In Indonesia, this theory does not always work.
In 1998, due to a sharp decline of the rupiah against the U.S. dollar, the government raised interest rates significantly. The hope, restrain the rate of increase in the U.S. dollar exchange rate. As a result, despite rising interest rates, gold prices also rose.
In theory, if the short-term interest rates rise, the price of gold down. In Indonesia, this theory does not always work.
In 1998, due to a sharp decline of the rupiah against the U.S. dollar, the government raised interest rates significantly. The hope, restrain the rate of increase in the U.S. dollar exchange rate. As a result, despite rising interest rates, gold prices also rose.
