Investors concerned that higher U.S. interest rates would spell an end to the gold rally may be in for a surprise. Bullion gained 52 percent in the June 2004 to June 2006 tightening cycle, when the Federal Reserve raised rates to 5.25 percent from 1 percent, and 5 percent from June 1999 to May 2000, when borrowing costs climbed to 6.5 percent from 4.75 percent. “The Fed is only tightening when they are concerned about inflation,” said Mike McGlone, a Bloomberg Intelligence strategist. “That is a good environment for gold,” which is often used as a hedge against inflation, he said.
Bloomberg
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