The bottom line is Federal Reserve rate-hike cycles are not bearish for gold as is widely believed today. Gold has risen in more rate-hike cycles than it has fallen, and the more extreme the rate-hike cycles the greater gold’s gains.
Gold surged dramatically in the last rate-hike cycle in the mid-2000s, and rocketed higher during the most extreme rate-hike cycles in history in the 1970s.
Higher rates are actually bullish for gold.
Contrary to the popular myth, gold is not and has never been a yield play. Investors diversify capital into gold when conventional stock and bond markets are weak.
And Fed-rate-hike cycles hurt stocks and bonds on multiple fronts, greatly ramping investment demand for gold.
With today’s stock markets so high and gold so low as the Fed’s next rate-hike cycle begins, gold’s next upleg is likely to prove massive.
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