📈 Fed rate hikes and gold since 1971
Ten hiking cycles since the gold–dollar link ended, plus a reusable checklist and our current assessment.
Since August 1971, when the US stopped converting dollars into gold, the Fed has run ten main hiking cycles. Using monthly average prices, here is how gold behaved around each one.
Why hikes are “bad for gold” — and why that is too simple
- Gold pays no interest, so higher rates raise the opportunity cost of holding it, and hikes often lift the dollar.
- What really matters is the real rate (policy rate minus inflation). Hikes that lag inflation leave real rates low — and gold can still rise.
- Markets trade expectations: a fully priced hike often does little on the day.
The ten cycles
| Hiking cycle | Rate | 6m before | During | 12m after |
|---|---|---|---|---|
| 1972.03–1974.07 | 约 3.3% → 13% | +14% | +198% | +15% |
| First cycle after the gold window closed; hikes lagged runaway inflation, real rates stayed negative and gold soared. | ||||
| 1977.01–1980.04 | 约 4.6% → 17% | +12% | +292% | -4% |
| Oil shock and double-digit inflation; the Fed stayed behind the curve and gold spiked to $850 in January 1980. | ||||
| 1980.08–1981.06 | 约 9% → 19% | -6% | -26% | -32% |
| Volcker pushed rates far above inflation; strongly positive real rates started a two-decade gold bear market. | ||||
| 1983.05–1984.08 | 约 8.5% → 11.6% | +6% | -21% | -5% |
| Inflation already falling; high real rates and a strong dollar weighed on gold. | ||||
| 1988.03–1989.05 | 约 6.5% → 9.8% | -3% | -16% | -1% |
| Pre-emptive tightening with positive real rates; gold drifted lower. | ||||
| 1994.02–1995.02 | 3% → 6% | +1% | -1% | +7% |
| Rates doubled in a year and bonds slumped, yet gold barely moved. | ||||
| 1999.06–2000.05 | 4.75% → 6.5% | -11% | +5% | -1% |
| Gold hit a 20-year low before the first hike (UK sales), then rebounded after it; the Washington Agreement capped central-bank sales. | ||||
| 2004.06–2006.06 | 1% → 5.25% | -4% | +52% | +10% |
| A “measured pace” of 25bp steps, a weaker dollar and rising emerging-market demand: gold rose ~50% over the cycle. | ||||
| 2015.12–2018.12 | 0.25% → 2.5% | -9% | +16% | +18% |
| Gold fell over 30% from the 2013 taper tantrum and bottomed in the very month of the first hike, then rose through the cycle. | ||||
| 2022.03–2023.07 | 0.25% → 5.5% | +10% | +0% | +23% |
| The fastest hikes in 40 years and a surging dollar: gold fell ~14% into October 2022, then central-bank buying drove a recovery. | ||||
Six patterns
- Hikes do not mean falling gold: up in 4 cycles, flat in 3, down in 3 — the falls (1980–89) came with high real rates.
- The expectation phase is often the hardest: gold fell over 30% from 2013 to 2015 and ~14% in the fastest phase of 2022.
- The first hike often marks the low (2004, 2015; 1999 one month later).
- Hikes that trail inflation did not stop gold in the 1970s.
- In the year after the last hike, gold rose in 4 of the last 5 cycles.
- Central-bank buying since 2022 has weakened gold’s sensitivity to rates.
Checklist when markets expect a hike
Stage · Market pricing (CME FedWatch) · Real rates · Reason and pace of hikes · US dollar · Central-bank and physical demand · Safe-haven / geopolitics. Rate each as supportive, negative or neutral, then weigh them together.
Current assessment
Stage: Hike expectations rising — policy rate 3.75–4.00%; markets expect a hold on 28 October and a hike in December.
| Factor | Now | For gold |
|---|---|---|
| Market pricing | CME: ~92% hold in October, ~78% hike in December; all 100 economists in a Reuters poll expect a December hike. | Negative |
| Real rates | Policy midpoint ~3.9% vs core PCE nowcast ~3.1%: real rate ~+0.8%, positive but low. | Neutral |
| Reason & pace | Mainly oil-driven inflation from the Middle East conflict (Brent ~$110–116) — a catch-up hike; pace unclear. | Watch |
| Already priced? | Gold is down about a quarter from January’s record above $5,500. | Supportive |
| US dollar | Dollar index not yet tracked on this site. | Watch |
| Central banks & physical | PBOC added ~23 t in September (23rd straight month); Indian festival demand up, Chinese jewellery soft. | Supportive |
| Safe haven | Conflict is affecting gold mainly via oil and rate expectations rather than haven buying. | Neutral |
We are in the ‘rising hike expectations’ phase, historically a weak period for gold, and gold has already fallen. What matters next is whether hikes surprise and whether real rates rise sharply. No price forecasts.
Watch next: Fed decision 28 Oct; September PCE and Q3 GDP 29 Oct; December FOMC.
Our note：We describe history and current facts only — no price forecasts and no investment advice.