While it’s all but certain the Fed will cut interest rates next week, it’s important to know what this could mean for your portfolio.

Yesterday I wrote about 8 sectors to play after the rate cut.

And today I’ll be showing you how another important sector could be affected.

I’m talking about metals. Specifically gold.

Now, there is generally a negative correlation between interest rates and gold prices. When interest rates fall, gold prices tend to rise, and vice versa.

Through history, real interest rates (adjusted for inflation), have coincided with rising gold prices.

For example, after the 2008 financial crisis, central banks cut rates to near zero, and gold experienced a strong bull market from 2009 to 2011. Similarly, gold prices surged in 2020 when central banks slashed interest rates in response to the COVID-19 pandemic.

Lower interest rates also tend to have a significant impact on gold prices for several reasons:

1. Opportunity Cost

When interest rates are low, the potential returns from interest-bearing assets like bonds or savings accounts decrease. In return, the opportunity cost of holding non-yielding assets like gold decreases. . This makes gold more attractive.

2. Weaker Currency

Lower interest rates often lead to a weaker domestic currency. Since gold is priced in U.S. dollars (USD) internationally, a weaker dollar makes gold cheaper for foreign investors, driving up demand and potentially pushing up prices.

3. Inflation Hedge

Low interest rates often accompany concerns about inflation, as central banks lower rates to stimulate economic growth. Investors might buy gold as a hedge against inflation, increasing demand and supporting higher prices.

4. Investor Sentiment

Gold is considered a safe-haven asset. In a low-interest-rate environment, if investors perceive risks in the broader financial system (e.g., due to loose monetary policy), they might flock to gold as a store of value.

Lower interest rates typically increase demand for gold, pushing prices higher due to reduced opportunity costs, currency depreciation, inflation concerns, and a shift toward safe-haven assets.

YOUR ACTION PLAN

We’re about to enter a period of lower interest rates, which could last years. Right now we’re positioning ourselves for this with some gold plays in Catalyst Cash Outs Live.

Click here to join us in several unique ways to play a potentially huge move in gold.

FUN FACT FRIDAY

Crypto is nasty work, according to a recent study: According to an academic paper by researchers at the University of Toronto and the University of Miami, crypto owners exhibit higher levels of “dark” personality traits such as narcissism, Machiavellianism, psychopathy and sadism.