Gold (lhs), in USD, and Real Federal Funds Rate (rhs), in %

Gold and Real Federal Funds Rate Chart

This chart shows the developments of gold and the Real Federal Funds Rate since 1971. Left hand scale (lhs): Price per ounce of gold in US dollars (USD). Right hand scale (rhs): Real Federal Funds Rate in % (Federal Funds Rate minus CPI year on year percentage change).

Analysis of the Gold and Real Federal Funds Rate Chart

This chart can be divided into three sections showing the long-term inverse relationship between gold and the real federal funds rate. In the first section, from 1971 to 1980, there were both negative and positive real rates, with the gold price peaking around the lows of the real federal funds rate. From 1981 to 2002, the real policy rate was almost always positive and the gold price fell from 800 US dollars to 250 US dollars. Since 2002, the real federal funds rate has mostly been negative, and gold’s strong performance highlights the inverse relationship of gold and the real federal funds rate.