Gold assets look more attractive in a low interest rate environment as the precious metal is more competitive against assets that pay low interest, like bonds. Additionally, if the Fed holds off on a rate hike, it would suggests the economy is not as strong, which would also help gold attract safe-haven demand.
However, that safe-haven demand is likely to wane as Treasury yields. Rising Treasury yield usually bolster the U.S. dollar and with commodities such as gold denominated in dollar, a stronger greenback crimps commodities prices.
“As market watchers have upped the possibility of an interest rate hike in December, he said, Fed expectations will continue to weigh on gold and other commodities,” adds CNBC.
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