Gold is well known for its negative correlation with real interest rates. But as is the case with gold, even this correlation does not work perfectly. Figure 1 shows the price of gold against 10-year real interest rates. In the lower panels I have included the nominal federal funds rate and the spreads between 20-, 10- and 5-year real rates.
The three periods when the relation stopped working are 2004-2007, 2016-2018, and 2022-2024. That is, when the Fed starts increasing interest rates, which means that real interest rates also start to rise.
Figure 2 shows the period 2002-2008.
Figure 3 shows the period 2015-2020.
Figure 4 shows the period 2021-2025.
It can be summarized that rising real interest rates at the beginning of the Fed's rate hiking cycle do not seem to be a problem.
Only at the end of the hiking cycle and then when real and nominal rates are going down again - these are the best times for gold. Such timing also rhymes well with the inverted real yield curve, which, when inverted, begins to indicate the approaching end of rate hikes and another cycle of rate cuts.
The best summary may be just Figure 5 - where I marked the best periods for gold from 2002 to today...
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