Interest rates have a big influence on the price of gold jewelry, even though gold itself doesn’t pay any interest or dividends. To understand this, it helps to know that gold is often seen as a safe investment, especially when other investments don’t look so good.
When interest rates go up, things like bonds and savings accounts start to offer better returns because they pay interest. This makes these investments more attractive compared to gold, which doesn’t generate any income by itself. So investors tend to move their money away from gold and into these higher-yielding options. As a result, the demand for gold drops and its price usually falls.
Another important factor is the value of the US dollar since gold is priced in dollars worldwide. When interest rates rise in the US, the dollar often becomes stronger. A stronger dollar means that people using other currencies find gold more expensive to buy, which can also lower demand and push prices down.
On the flip side, when interest rates fall or are expected to be cut by central banks like the Federal Reserve, holding onto non-interest-paying assets like gold becomes less costly in terms of missed earnings from other investments. This tends to increase demand for gold because it looks more appealing compared to low-yield bonds or savings accounts. In such times, investors often turn back to gold as a safe haven or store of value.
Real interest rates—meaning nominal rates adjusted for inflation—play an especially big role here. If real rates are negative (inflation is higher than nominal interest), then holding cash or bonds actually loses purchasing power over time while holding physical assets like gold protects against inflation erosion better. That’s why during periods with low or negative real yields on government bonds we often see rising prices for gold jewelry and bullion alike.
In summary: rising interest rates generally lead to lower prices for gold jewelry because alternative investments become more attractive and strengthen the dollar; falling or low-interest-rate environments make owning non-yielding assets like gold relatively cheaper and boost its appeal among buyers looking for safety or protection against inflation risks.