“When the Fed reversed course in 1975, lowering its rate target from 13 to 4.75 percent, gold actually fell 23 percent. When the Fed raised the funds rate all the way to 14 percent in 1980, rather than strengthen, the dollar fell, driving the price of gold from $150 an ounce to an all-time-high of $892.”
I wonder about causation. Did the value of Gold change in reaction to the Fed’s moves or did the Fed change to stop dollar problems which then showed up in the price of gold?
I’ve been trying to get a handle on the value of gold versus the dollar and its abilty to predict general economic trends. First I think gold and oil are poor commodities to use since they raise and fall on other than just pure economic news. Maybe lead? I don’t know. Anyway I did some quick and dirty analysis and found gold and oil and lead seem to be closely tied.
Just an amateur economist with lots to learn.
The economic facts of the 1970’s should shoot down the widely held belief that economic growth and employment growth cause inflation. Instead, the word “stagflation” was invented and everybody maintained business as usual.