Commodities Buzz: Increase In Interest Rates Will Likely Have Limited Effect On Gold

13 Jan 2022 , 02:53 PM

The World Gold Council (WGC), in its Gold Outlook 2022, stated that despite potential rate hikes, real rates remain low. Gold may face similar dynamics in 2022 to those of last year, as competing forces support and curtail its performance. Near term, the gold price will likely react to real rates in response to the speed at which global central banks tighten monetary policy and their effectiveness in controlling inflation. WGC says that while rate hikes can create headwinds for gold, history shows their effect may be limited. Elevated inflation and market pullbacks will likely sustain demand for gold as a hedge. Jewellery and central bank gold demand may provide additional longer-term support, according to WGC.

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