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Gold Rose Big During Historical Fed Rate Hikes

Historically since 1970, the Fed Funds Rate has averaged 5.66% vs. the current Fed Funds Rate of 0.11%. There have been four major periods of the Federal Reserve raising the Fed Funds Rate from below its average of 5.66%, and gold prices have increased during all four of these periods – with gold prices averaging a gain of 146.54%.

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February 1972-December 1974: Fed Funds Rate increased from 3.29% to 12.92% while gold rose from $48.40 per oz to $154 per oz for a gain of 218.2%.

January 1977-April 1980: Fed Funds Rate increased from 4.61% to 17.61% while gold rose from $132.10 per oz to $519.25 per oz for a gain of 293.1%.

December 1992-April 1995: Fed Funds Rate increased from 2.92% to 6.05% while gold rose from $332.90 per oz to $389.50 per oz for a gain of 17%.

May 2004-July 2006: Fed Funds Rate increased from 1% to 5.24% while gold rose from $387.30 per oz to $637 per oz for a gain of 57.86%.

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With gold currently at $1,190 per oz and the Fed expected to begin raising rates later this year, gold could easily rise by 146.54% once again to $2,934 per oz.

Since 1970, gold has averaged a year-over-year price gain of 10.92%. Gold has averaged a year-over-year price gain of 15.39% when the Fed Funds Rate has increased on a year-over-year basis, which is more than double gold’s average gain of 7.09% when the Fed Funds Rate has declined on a year-over-year basis. When the Fed Funds Rate has increased year-over-year by 25% or more, gold has averaged a year-over-year gain of 25.1%.

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