highest in three years, at 4.2 percent<\/a>. At the same time, the country\u2019s job market has held steady, dashing expectations of any immediate cuts to interest rates.<\/p>\nWhile gold acts as an inflation hedge for investors, the higher interest rates tend to weigh on the metal.<\/p>\n
Gold, after all, is considered a \u201cnon-yielding\u201d asset, as it does not generate income beyond its own worth. In other words, to profit from gold, the metal\u2019s value has to increase.<\/p>\n
\u201cGold is as close to real money as is possible in terms of an asset,\u201d Justin Cardwell, head options analyst for the financial website OptionSpreaders.com, told Al Jazeera. \u201cIt doesn\u2019t collect dividends, but it also doesn\u2019t yield value till prices go up. People buy gold for its appreciation [in value].\u201d<\/p>\n
That puts interest rates in direct competition with gold.<\/p>\n
\u201cGold loses its shininess as an investment if interest rates are high and people are going to pound into the dollar,\u201d Cardwell added.<\/p>\n<\/p>\n
The Iran conflict has been positive for the dollar, and since gold is priced in dollars, the two move inversely.<\/p>\n
\u201cWhen the dollar strengthens, gold feels the pressure; when the dollar weakens, gold tends to climb. Right now, the dollar is strong, and gold is feeling it,\u201d Collin Plume, CEO of Noble Gold Investments, told Al Jazeera in an email.<\/p>\n
But Plume added that the future is uncertain for the value of both.<\/p>\n
\u201cThe biggest question we\u2019re dealing with for the rest of this year \u2014 and probably the next few \u2014 is what comes next,\u201d he said.<\/p>\n
\u201cA few months ago, what came next was a rate cut, so prices were rising and assets were appreciating across the board. That\u2019s changed. Now we\u2019re facing headwinds, including the real potential of a rate increase. Any asset is affected by that shift, and gold is especially price-sensitive to interest rates.\u201d<\/p>\n
Prior to the war against Iran, President Donald Trump had lobbied for the Federal Reserve, the US\u2019s central bank, to dramatically reduce interest rates.<\/p>\n
But the CME FedWatch tool, which helps to predict how the Fed might adjust interest rates, now estimates that the likelihood of a rate hike by December is more than 50 percent.<\/p>\n
That is likely to influence the value of gold, according to Plume.<\/p>\n
\u201cInterest rates and inflation as two sides of a seesaw \u2026 and gold sits right in the middle of that,\u201d said Plume. \u201cThe catch in 2026 is that both are happening at once \u2014 and right now, the rate side is winning. That\u2019s why gold is facing headwinds.\u201d<\/p>\n
On Friday, as the news of a potential deal between the US and Iran broke, gold closed slightly higher than on the previous day.<\/p>\n
\u201cHeadlines of the possibility of the war coming to close would be positive for gold because the assumption is that inflation will come down,\u201d said Cardwell.<\/p>\n
But that process would still take several months.<\/p>\n
\u201cThis range that gold\u2019s currently in, it\u2019s very likely this is a place of support. Even when the war ends, there are so many other factors that will keep a lid on what gold prices can do,\u201d Cardwell added.<\/p>\n","protected":false},"excerpt":{"rendered":"In times of global crises, the price of gold shoots up as investors look at the yellow metal…\n","protected":false},"author":2,"featured_media":735484,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[45,1686,49,48,46,14380,135,44,772,1690,206083],"class_list":["post-735483","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-business-and-economy","tag-ca","tag-canada","tag-economy","tag-financial-markets","tag-inflation","tag-news","tag-united-states","tag-us-canada","tag-us-israel-war-on-iran"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/735483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=735483"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/735483\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/735484"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=735483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=735483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=735483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}