Gold and the misconception regarding rate hikes.

FX_IDC:XAUUSD   Gold Spot / U.S. Dollar
There seems to be a strong misconception regarding the Fed Fund Rate, and it's effect on the DXY and XAUUSD .

As you can see above, XAUUSD rallied over 100% when the Fed Fund Rate was raised from 1% in 2003 to 5% in 2006 (this wasn't direct, there were numerous rate hikes in between, just for the simplicity of the chart I've only added a few).

When the Fed Fund Rate was cut down to 3% in March 2008 (which is still 3 times as high as the 1% in 2003), XAUUSD hit a high of approximately 1,030 USD. This gave XAUUSD over a 200% gain in 5 years, with rate hikes at least 3x higher than it was in 2003.

Also, if you were to look at the DXY during this 5 year run, it had fallen significantly into these rate hikes.

It appears that the harsher the rate hikes are, the faster it pushes the US into a recession, which is obviously very bullish for XAUUSD , and it is far from a guarantee that these 0.25% rate hikes are bad for XAUUSD , and good for DXY .


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