To make it easier to understand that we can say that Opportunity cost is the idea of giving up a near-guaranteed gain in one investment for the potential of a greater gain in another.
Just consider this aspect that if inflation is high and even if you earn good interest rate lesser than the inflation rate means that your money is losing value and you are better off using the money and here gold comes into play as it is a long term asset and thus people will like to invest in gold even if one gets 0% interest rate.
The same can be said of rising interest rates, which boost interest-bearing asset yields and push opportunity costs higher. In other words, investors would be more likely forgo gold as lending rates rise since they'd be netting a higher guaranteed return.
Impact FOMC Meet on Goold Prices
You must always follow the Federal Reserve commentary which can also move the gold markets. The Federal Open Market Committee, which holds meetings about once every six weeks, discusses the state of the U.S. economy and the future of monetary policy. If the FOMC takes a stance that implies rates could rise in the near future, the gold price tends to react poorly since, once again, the opportunity cost of forgoing interest-bearing assets rises. However, if the FOMC insinuates that rates are planning to hold steady, gold prices tend to rise since the opportunity cost of forgoing interest-based assets instead for gold remains low.Thus it makes sense to follow the Fed policies and FOMC meets to make sure that you are aware of the prevalent likely trend in the gold market.
There are few other factors also which affect the gold prices and we will be discussing the same in subsequent articles and thus it makes sense for you to get our MCX Gold Intraday tips and make money with the research team who knows how the market is going to behave.
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