Part 6 · Commodities and the world economy · Lesson 30
Why does gold rise when people are anxious?
Gold pays no interest or dividends. Yet when the world gets anxious, people look for gold. Let's explore the three forces that move the gold price.
QToday's question
Gold pays no interest and no dividends. So why does its price rise every time the world gets anxious?
The gold price rose more than 60% in 2025 alone, and in January 2026 it topped $5,000 per ounce for the first time. And that was while US interest rates were at quite a high level. Deposits pay interest and stocks pay dividends and earnings, but gold just sits in a vault. In this lesson we unpack, one by one, what moves the price of gold, which 'produces nothing.'
MAPLearning map for this lesson
We build it up in three steps. At the end of each step, a 'Quick check' lets you test your understanding before moving on.
In Lesson 7 you learned the real interest rate, the true rate after subtracting inflation. In Lesson 11 you learned that in 2022, when most assets fell, gold (GLD) held up at −0.8%, and about inflation-linked bonds (TIPS). In Lesson 17 you saw the discount rate, where higher rates shrink future value, and in Lesson 24 the dollar index and the risk aversion that sends money to safe places in a crisis. Following oil in the previous Lesson 29, this lesson reads gold, the other star among commodities, using those pieces.
- STEP 1 · Basic conceptsGold is money with no interest
You can explain how gold differs from other assets and why it is called a .
- STEP 2 · Understanding the principleThe three forces that move the gold price
You can explain with how real interest rates, the dollar, and anxiety move the gold price, and say why gold can fall too in the early stage of a crisis.
- STEP 3 · Real-world application20 years of data and the 2022 reversal
You can explain, together with , why the long-standing inverse relationship between the gold price and real interest rates loosened after 2022, and you can read gold-related news.
STEP 1Gold is money with no interest
If you line up deposits, bonds, stocks, and gold side by side, there is one odd thing about gold alone: holding it produces nothing. This 'oddity' is the key to understanding the gold price.
An easy analogy · an emergency-fund safe
Suppose you have a small safe at home with a gold ring in it. Unlike money in a bank, it earns no interest. But whether the bank closes or the value of money wobbles, a gold ring stays a gold ring. In normal times you think, 'It pays no interest, so why am I holding it?' but when the world gets anxious you think, 'I'm glad I have gold in the safe after all.' The gold price moves back and forth between these two feelings.
How is it different from other assets?
The amount of gold that can be mined grows only a little each year, and it does not rust or rot. That is why it has been used as a 'store of value' for thousands of years. In international markets, gold is priced in dollars per (about 31.1 grams). When the news says 'gold at $4,000 an ounce,' it means 31.1 grams of gold costs $4,000.
In situations where 'promises' wobble, such as a bank failing, the value of money plunging, or war breaking out, gold shines because it is an asset with no counterparty. That is why it is called a that people flock to in a crisis. It is a similar feeling to the money rushing into the dollar during risk aversion, as seen in Lesson 24.
Quick checkIf you keep KRW 10 million worth of gold in a safe for 10 years, how much 'interest' will it have added after 10 years? Then what is a person holding gold expecting?
STEP 2The three forces that move the gold price
If you start from the fact that gold pays no interest, the forces that move its price become easy to see. Let's take them in order, starting with the most important one.
Real rate↓ · dollar↓ · anxiety↑ → gold price↑
Gold becomes more attractive the smaller the cost of holding it (the real interest given up), the weaker the dollar that prices it, and the more anxious the world gets. The opposite direction weighs on the gold price.
The first force: the real interest rate, the cost of holding gold
If you hold gold, you give up the interest you could have received by putting the same money in a deposit or bond. What you would have gained had you chosen otherwise is called . What matters here is not the nominal interest rate but the after subtracting inflation (Lesson 7). Even if the deposit rate is 5%, if prices rise 6% the deposit's purchasing power actually shrinks, so holding gold costs you little. In the market, the yield on the US 10-year inflation-linked bond () is seen as the representative real interest rate (Lesson 11).
See it in a chart: the opportunity cost of holding gold
Change the real interest rate. Compare the 'amount of goods you can buy' after 10 years when you put KRW 10 million in a deposit versus holding it in gold. This is a hypothetical model that assumes gold rises only as much as prices (its real value unchanged).
The cost of holding gold for 10 years: you give up KRW 2.93 million worth of purchasing power compared with the deposit
Hypothetical simple model: real value of the deposit = KRW 10 million × (1 + real rate)10. We assumed gold's real value does not change. The actual gold price swings widely, and there are also taxes and storage costs. The preset figures are monthly averages of FRED DFII10 (US 10-year real yield).
Press 'Aug 2020' and the real rate is negative, so gold actually comes out ahead. Money in a deposit falls behind inflation, so there is effectively no cost to holding gold. In fact, in August of that year the gold price rose to an all-time high at the time of $2,069 an ounce (futures close on Aug 6). Conversely, when the real rate exceeds 2%, the purchasing power given up over 10 years comfortably exceeds 20%. In Lesson 17 you learned that when interest rates rise, the present value of distant future earnings shrinks, and gold has no future earnings at all, so it is an asset especially sensitive to the 'cost of waiting.'
1. Real interest rate
When the real rate falls, the cost of holding gold shrinks, which is favorable for the gold price. For a long time it was the strongest force explaining the gold price.2. The dollar
Gold is priced in dollars. When the dollar weakens, gold feels cheap in other countries' currencies, demand rises, and the dollar-denominated gold price tends to rise (Lesson 24 ).3. Anxiety and crises
When war, financial anxiety, and distrust of currencies grow, demand for assets with no counterparty rises. Central bank gold buying also belongs to this force.Common misconceptions
- 'In a crisis, gold always rises?'
- In the early stage of a crisis, gold often falls along with everything else. This is because investors sell the easiest assets to sell first to cover losses or raise cash. Gold futures fell about 30%, from $1,003 in March 2008 to $705 in November, in the middle of the financial crisis, and in March 2020 they also fell about 12% between the 9th and the 18th before rising again.
- 'Gold always beats inflation?'
- Over very long periods it tends to keep up with prices, but over a span of a few years it can diverge widely. Gold rose to $1,889 in August 2011 and then came down to around $1,050 in December 2015. Prices kept rising in the meantime, so those who bought in that period lost purchasing power for a long time.
- 'It's a safe-haven asset, so its price doesn't move much?'
- 'Safe' means there is no risk of a counterparty failing; it does not mean the price is stable. The gold price can move 20–30% within a few months.
Quick checkUS nominal interest rates are unchanged, but expectations that inflation will rise have grown. What effect does that have on the real rate and the gold price?
STEP 320 years of data and the 2022 reversal
Now let's check whether the gold price and real interest rates really moved in opposite directions. But the data shows one scene that differs from the textbook. That scene is the highlight of this lesson.
Overlaying the gold price and the real interest rate
The chart below overlays each month's gold price (monthly average) and the US 10-year real yield from 2003. The real rate axis is drawn upside down. So when the two lines rise together, it means 'the gold price rose when the real rate fell.'
Gold price vs. US 10-year real yield (inverted axis) (Jan 2003 – Sep 2026, monthly average)
Hover or tap on the chart to see the two numbers for that month.
Sources: Gold price: monthly average of daily closes of Yahoo Finance COMEX gold futures (GC=F). Real interest rate: monthly average of FRED DFII10 (yield on 10-year inflation-indexed Treasuries) from the Federal Reserve Bank of St. Louis. Correlation coefficients calculated by Robin Invest from the log of the gold price and the level of the real rate. Checked 2026-10-05.
In 2003–2021 it was just as the textbook says. After the 2008 financial crisis, as the real rate fell to near 0%, the gold price rose to the $1,800s in 2011, and when the real rate rose again in 2013, the gold price dropped sharply. When the real rate fell to −1% in 2020, gold set an all-time high again. The correlation between the two in this period was −0.84, a very strong inverse relationship.
But from 2022 the scene changes. As the Fed raised rates quickly, the real rate jumped from around −1% at the end of 2021 to 1.6% in October 2022 and 2.4% in October 2023. By the textbook, the gold price should have fallen sharply. But gold held roughly flat through 2022 (futures $1,829 → $1,826), then rose to $2,641 at the end of 2024 and $4,341 at the end of 2025. On Jan 29, 2026, it hit an all-time high with a futures close of $5,318. And that was with the real rate in the 2% range.
The star of the reversal: central banks
Because a new big player appeared. Central banks around the world began converting part of their foreign exchange reserves into gold. Many analyses say that after Russia's overseas assets were frozen in 2022, more central banks wanted gold, which does not rely on any particular country's promise. According to the World Gold Council (WGC), exceeded 1,000 tonnes for three years in a row, 2022–2024.
Global central bank net gold purchases (tonnes)
Source: World Gold Council, Gold Demand Trends annual reports for each year (figures at the time of release; they may be slightly revised in later reports). 2010–2021 average 473 tonnes, 2022 1,082 tonnes (the most since 1950), 2023 1,037 tonnes, 2024 1,045 tonnes, 2025 863 tonnes. Checked 2026-10-05.
Central banks do not buy gold to earn interest, so they keep buying even when real rates are high. While the first force, the real rate, was pressing down on the gold price, the third force (anxiety and central bank demand) pulled it up more strongly. In 2025 the gold price rose so much that central bank buying dropped to 863 tonnes, but that was still nearly twice the past average. This scene teaches the lesson that 'it is risky to explain a price with only one force.'
For stocks, like this: how to read gold news
| When you see news like this | Force acting on the gold price | What to look at together |
|---|---|---|
| 'Inflation slows and real rates fall' | Opportunity cost↓ → favorable for gold | Often favorable also for growth stocks and long-term bonds, whose earnings lie far in the future (Lessons 15 and 17) |
| 'Dollar strength continues' | A drag on the dollar-denominated gold price | If USD/KRW rises together, gold priced in won may fall less or even rise (Lesson 28) |
| 'Middle East conflict escalates, safe-haven demand' | Anxiety↑ → gold demand↑ | In the early stage of a crisis, gold can also wobble from selling to raise cash |
| 'Central bank gold buying slows' | Big-player demand↓ | Check whether the force that has supported the gold price since 2022 is weakening |
Stocks and gold respond to different forces, so holding them together can mean one holds up when the other wobbles. 2022, seen in Lesson 11, is the typical example. That year US stocks (SPY) fell −19.5% and long-term US Treasuries (TLT) −32.8%, but gold (GLD) held roughly flat at −0.8%. You can see what score gold currently gets in the macro environment in the 'Gold' row of the Impact Map of the Macro Map, and how gold relates to each factor in past data in Did it really happen that way?. Gold is an overseas asset, so in won terms it also carries an exchange rate effect, and you can split that out with the FX Return Calculator.
It is not always so. The relationship between the gold price and real rates can diverge for years, as it has since 2022, and gold has no earnings, so it is hard to calculate a 'fair price.' Remember that gold is not an asset that generates earnings but one that prepares you for when other assets wobble.
Quick checkIn 2023 the US real rate exceeded 2%, yet the gold price rose. How would you explain this with the three forces from STEP 2?
✓What we learned today
- Gold has no interest or dividends, but it is 'money no one can print' that has held its value for thousands of years. That is why more people turn to it as a safe-haven asset in a crisis.
- The cost of holding gold is the interest given up. The higher the real rate after subtracting inflation, the more costly it is to hold gold, and the lower or more negative it is, the more attractive gold becomes.
- Gold is priced in dollars, so the gold price tends to rise when the dollar weakens. However, in the early stage of a crisis, gold often falls along with everything else under selling to raise cash (about −30% from the 2008 peak, about −12% in March 2020).
- In 2003–2021, the gold price and the US 10-year real yield showed a clear inverse correlation, with a correlation coefficient of −0.84. But since 2022, even though the real rate rose to the 2% range, the gold price set new all-time highs, and the correlation over this period flipped to +0.52.
- The big force behind the reversal was gold buying by the world's central banks. They bought more than 1,000 tonnes for three years in a row, 2022–2024, and in 2025 too, at 863 tonnes, far above the 2010–2021 average (473 tonnes).
If oil and gold are commodities that reflect 'anxiety' and 'inflation,' there are also commodities that take the economy's temperature. In the next lesson, we read the economy and the semiconductor cycle through copper, known as 'Dr. Copper,' and the price of DRAM, the heart of Korean exports.
Quiz5-question quiz
Pick an answer and it's graded right away with an explanation.
Q1. What is the biggest difference between gold and deposits, bonds, and stocks?
Holding gold produces no interest or earnings. That is why 'how much could I earn by putting it elsewhere instead of gold,' that is, the opportunity cost, matters for the gold price.
Q2. The real interest rate rose from −1% to +2.5%. What happens to the cost of holding gold (opportunity cost)?
In a deposit or bond you could earn 2.5% more even after subtracting inflation, so the share you give up while holding gold gets bigger. For a long time, the gold price was weak at such times.
Q3. What is the most appropriate reason the gold price fell along with everything else in the early stage of the 2008 financial crisis and the March 2020 COVID shock?
In the early stage of a crisis, investors desperate for cash sell even gold. It fell about 30% from the peak in 2008 and about 12% in March 2020, then rose again.
Q4. What is the biggest reason the gold price set new all-time highs after 2022 even though the real rate rose to the 2% range?
According to the World Gold Council, central bank net gold purchases exceeded 1,000 tonnes for three years in a row, 2022–2024. A big buyer that buys regardless of interest pulled the gold price up harder than the force of the real rate.
Q5. If the value of the dollar falls sharply, how does the dollar-denominated gold price generally move?
Gold is priced in dollars. When the dollar weakens, gold feels cheap in other countries' currencies and demand rises, and it takes more dollars to buy the same gold.
NextTerms · Next lesson · Related tools
An asset people flock to when crisis or anxiety grows. Gold, the dollar, and US Treasuries are typical examples. It does not mean 'the price is stable'; it is closer to meaning that the risk of a counterparty failing is small.
Opportunity costOpportunity costThe value of the other choice you gave up by making a particular choice. Holding gold means giving up the real interest you could have received from deposits and bonds, so the higher the real rate, the greater gold's opportunity cost.
Central bank gold buyingCentral bank gold buyingCentral banks around the world buying gold with part of their foreign exchange reserves. According to the World Gold Council it exceeded 1,000 tonnes for three years in a row, 2022–2024, and is regarded as a major force supporting the gold price since 2022.
Troy ounceTroy ounceA unit of weight for precious metals such as gold and silver, about 31.1 grams. The international gold price is usually quoted in dollars per troy ounce.
Real interest rateReal interest rateThe nominal interest rate minus the inflation rate (approximately). If it is negative, the power of your money shrinks even though you earn interest.
Inflation-linked bondInflation-linked bond (TIPS)A bond whose principal grows with the price index. It keeps up with rising prices, but its price can fall when real interest rates rise. The US version is called TIPS.
Dollar indexDollar indexThe average value of the dollar against several currencies such as the euro and yen. There is the DXY, based on six major currencies, and the Fed's broad dollar index, which covers a wider group of trading-partner currencies.
Risk aversion (safe-haven preference)Risk-offA phenomenon in which, when anxiety grows from events like war, financial crises, or sharp stock market drops, investors sell stocks and emerging-market currencies and flock to safe-haven assets such as the dollar, government bonds, and gold. The won generally weakens at such times.
CommoditiesCommoditiesBasic materials used in production, such as crude oil, natural gas, metals and grains. When their prices rise, they push up inflation and boost the profits of companies that produce and sell them.
Discount rateDiscount rateThe rate used to convert future money into today's value. It is usually set as an interest rate plus a risk premium. The higher the discount rate, the smaller the present value of future earnings.
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Impact Map→Did it really happen that way?→FX Return Calculator→This is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.