| Conventional wisdom suggests that a Federal Reserve rate hike next month is bearish for precious metals, particularly gold. This is because gold investors aren't rewarded with the interest coupon payments as Treasury holders are. Thus, the opportunity cost of owning gold is the potential cash flow of interest payments, or dividends if comparing it to equities.
Accordingly, if bond and note yields are on the rise, there is less incentive to be long gold. Or so says the theory. Nevertheless, there is another school of thought which suggests that higher interest rates generally come with higher inflation. This, of course, is supportive to the precious metals markets...............................................Full Article: Source
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