Will Gold Fall When the Fed Raises Interest Rates? | SWP Cayman

Will Gold Fall When the Fed Raises Interest Rates?

Jeff Clark | Mar 7th 2022, 5:00:36 pm

The Russian attack on Ukraine has grabbed the headlines and pushed gold higher, but perhaps a longer-term catalyst for gold is rising interest rates. Yes, rising rates. That may sound counterintuitive since gold pays no interest, but to the surprise of many investors, a period of higher interest rates has historically been positive for gold.


Written by Jeff Clark, Senior Analyst GoldSilver.com, Advisory Board Member SWP


The Russian attack on Ukraine has grabbed the headlines and pushed gold higher, but perhaps a longer-term catalyst for gold is rising interest rates.

Yes, rising rates. That may sound counterintuitive since gold pays no interest, but to the surprise of many investors, a period of higher interest rates has historically been positive for gold.

The following chart documents the rate hike cycles from the U.S. Fed. There have been 8 definable periods since the early 1970s. Some are long, some are short, but check out how gold has performed during those cycles (blue boxes).

Of the 8 hike cycles in the U.S., gold has risen in 6 of them. And in more than one case, substantially. In fact, the average of those 6 gains is 79.6% (the average of all 8 is 57.3%).

Why does gold tend to rise during hike cycles? The answers vary, but they’re all related to the circumstances at the time, the drivers that compel the Fed to raise rates in the first place. Like now… many central bankers are forced to hike rates due to spiking inflation, a definite gold catalyst.

So will gold fall if the Fed raises rates at their March 15 meeting? History says it is more likely to do the opposite. Of course the Russia/Ukraine war will impact the Fed’s decisions, but the point is gold tends to perform well during the entirety of a hike cycle, regardless of how long or short it may be.

This is yet another signal that one must prepare for events before they occur. That suggests investors make sure they own a meaningful amount of physical gold now.

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