When the Federal Reserve starts cutting rates, gold usually reacts positively. The connection between Fed policy and gold prices has long been one of the most fascinating dynamics in global markets. In 2025, that story is playing out again as rate cuts ripple through currencies, yields, and investor sentiment.
So, why does gold react to Fed decisions? Opportunity cost and real interest rates; let’s explore…
When interest rates fall, traditional yield-bearing investments like bonds or savings accounts become less appealing. Suddenly, holding gold, which doesn’t pay interest but holds intrinsic value, looks a lot smarter.
Think about it this way: if 10-year Treasury yields drop from 4.5% to 2%, the “cost” of owning gold (instead of earning interest elsewhere) shrinks dramatically. Investors don’t feel like they’re missing out on returns, so they shift toward hard assets.
That’s why periods of aggressive rate cuts often coincide with sharp jumps in gold demand. During the 2019–2020 cycle, for example, the Fed dropped rates from 2.5% to 0.25%, and gold prices climbed more than 25% over the following year.
Real interest rates (nominal rates minus inflation) are one of the most important indicators for gold. When inflation outpaces interest rates, meaning real rates go negative, gold tends to rally.
If inflation sits at 3.2% and the federal funds rate is only 2.5%, that’s a real rate of -0.7%. In those conditions, the purchasing power of cash erodes, and investors often turn to gold and silver as protection.
Gold’s role as a safe haven becomes even more pronounced in uncertain times. When the Fed eases policy, it often signals concern about slowing growth, prompting investors to look for stability. Historically, gold and silver have delivered exactly that.
During the early 2000s tech crash, gold gained 26% as the Fed slashed rates from 6.5% to 1%. In the 2008 financial crisis, gold climbed nearly 40% while rates collapsed to near zero.
Fast forward to today, and with 2025’s rate cuts already underway, we’re seeing the same flight to real assets.
What’s different this time is how investors are gaining exposure. The world is moving toward digital assets, and tokenised precious metals are bridging the gap between traditional stability and modern accessibility.
Through the Gold Standard (AUS) and Silver Standard (AGS) tokens, investors can hold fully-backed, vaulted bullion on the blockchain; combining the trust of physical ownership with the speed and transparency of digital technology.
As global rates fall and currencies wobble, gold and silver continue to prove their timeless appeal. Whether held in bars, coins, or tokenised form, they remain the assets investors turn to when money gets cheaper and uncertainty grows.
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