Gold's Response to Zero Interest Rates Is Not What You Think

The Federal Reserve has implemented two zero-interest rate policies (ZIRP), and their impact on gold prices is often misunderstood. The first ZIRP ran from December 16, 2008 to December 16, 2015, and the second from March 15, 2020 to March 16, 2022. During both periods, the federal funds target was pinned at or near zero.

However, gold's response to ZIRP depended not on the zero interest rate itself but on inflation. When inflation is high, cash loses purchasing power, making gold more attractive as a store of value. Conversely, when inflation falls, cash regains its purchasing power, reducing gold's appeal.

The calculation of the real policy rate, which drives gold prices, is simple: take the midpoint of the Federal Reserve's target range and subtract the latest year-over-year change in consumer prices. In 2011, for example, with a target midpoint of 0.125% and inflation at 3.2%, the real rate was negative 3.1 points.

In contrast, as of July 2026, with a target midpoint of 3.625% and headline inflation at 3.4%, the real rate is positive 0.2 points. Savers pay for ZIRP, as it transfers purchasing power from those holding cash to those holding debt and leveraged assets.