Gold Defies Higher Interest Rates in Tightening Cycles, Economist Finds

Economist Taher Morsi challenges the widespread notion that higher interest rates automatically lead to lower gold prices. Historical data since the global financial crisis shows a more complex pattern, with gold advancing during several monetary-tightening cycles.

Morsi points out that gold's response to Federal Reserve decisions typically unfolds in two stages: an initial market reaction immediately after the decision, followed by a more stable trend once investors absorb the direction of monetary policy and its implications for inflation and economic growth.

The economist notes that gold did not decline after every rate increase. Instead, it rose sharply during the tightening cycle that began in December 2015, despite the Federal Reserve raising interest rates. This cycle provides a clear example of gold's ability to regain its upward trajectory despite higher interest rates.