Would Gold Eagles Suffer To An Interest Rate Hike

March 22, 2010 - The Federal Reserve announced this week that they will be keeping rates “exceptionally low for an extended period of time”, but there is a growing realization that Fed policymakers will need to increase rates. If they are to head off inflation, protect the value of the dollar, and the country's credit rating that rate increase may have to come sooner rather than later. Many Gold Eagle coin purchasers worry how a rate hike will affect their investments.

In the short term, an increase in interest rates could be negative for Gold Eagles and gold in general. If the 1970’s is any indicator, rising interest rates are likely to be as positive for gold in the medium to long term. Savers and bondholders will probably become enticed by higher yields when interest rates return to more normal levels (above 5%); at that point gold could be vulnerable to a correction. We are not in any danger from that any time soon.

Rising interest rates are not positive for equities, property or volatility, and further falls in these asset classes could lead to further safe haven demand for gold. Gold is likely to be correlated with rising interest rates and will probably trend lower towards the end of the interest rate hiking cycle. It is worth remembering that the 1970s gold bull market only ended with interest rates close to 20%.

For more information about this year’s Gold Eagle series bullion coin, to include specifications and design details, Contact one of our friendly Gold Eagle Coin Experts.

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Joshua Harris

Senior Staff Writer - Gold-Eagle.org