It's hard to draw a direct correlation between spot gold and int. rates. Some time ago a Poster here superimposed charts of the two. Certainly POG tumbled - for 20 years - from 1980-2000, finally finding a base around USD380. The Fed raised rates to a record 19% in 1981 to purge inflation from the system once and for all (and succeeded), and progressively lowered them from about 1982 thru 2000, giving rise to the longest stock bull mkt in stock in US history until the bubble burst March 2000-2003. Having said that, there was a gold and silver bubble (Hunt brothers cornering the Silver mkt) that burst in 1980, and I, for one, find it hard to disentangle those two factors (the bursting bubble = bad, and declining rates = should be good). The conventional wisdom (which is rarely wise) says lower rates are better for gold and vice versa. But if pressed, I'd say that money going into stocks (as a result of lower rates being better for business, far better than lower corporate taxes) outweighed the need to buy gold for returns. And indeed that would have been the smart choice. In addition, Incomes Taxes on L/T Cap Gains (and Dividends) were also lowered in US 1997, making gold even less attractive.
During 2000-2003 stock market crash, gold started its run-up (having based) , in an environment of low interest rates and collapsing stocks. There was also 9/11 attacks of course...I remember the day well (I was there), but not the impact on gold....probably soared until forced closure of all markets. Rates went up to 5.25% in 2006-2007, but POG continued to rise, without a hiccup (against the conventional wisdom), and then incrementally to ZIRP once the next stock market crash hit (GFC: 2007-2009). There was - ironically - a significant POG hiccup there, during the GFC trough (08-09), as rates were reduced to zero....against the conventional wisdom. POG recovered thru the high of 2011.
A Poster mentioned QE. Again, this is confusing. I suggest that most of this money went directly into stocks (ultimately leading to all time historic highs early 2015, after QE cessation), yet POG continued to rise for the first 2-3 of years of QE (2009 - 2011). POG tested 1,800 3 times and finally broke down late 2012, and been downhill since then, a major bear market, from approx USD 1,800 to almost 1,000.
I'd speculate that once again, as in the 80's and 90's - on aggregate - money (Fed printed money) went directly into stocks.
So, the correlation between rates and gold is mixed, at best. There appears to be a much closer (inverse) correlation between equities and POG. This is probably not new news.
I have not mentioned the USD (requires more work).
I disagree with the Analyst's "sound growth" in the US in 2016 .
I lived in US for much of this time , and so am pretty familiar with markets there.
Having said all the nonsense above, despite the current bear market, gold has performed better than the Benchmark S&P 500 Index from 2000 thru 2014 (and maybe 2015).
I don't make predictions, but the chart looks pretty ....uninspiring...to me.
Presumably it will change when there is a major shock to the system, IMHO. Personally, having lived through as many as I have, first hand, I expect such a shock, aka "Black Swan" event.
Disclosure: Long EVN
Monthly Chart, COMEX GOLD FUTURES
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