The Impact of the Federal Reserve's Interest Rate Hike on Gold Futures Prices: The Dynamic Trend

Abstract

This article aims to study how the increase in the Federal Reserve’s Interest Rate is going to impact the gold futures prices under a global economic recession period. Through collecting historical gold prices in chronological order from 2010, the data are then adapted into ARIMA model. It is to investigate the predicted correlation between the macro indicators and performance of the financial derivatives. The result includes that the policy change will have more dominant effects in the long run than short run. The real-world analysis should also incorporate multiple factors that range from qualitative to quantitative to facilitate a more precise prediction of future derivative’s price. The significance of the study is to suggest the time value of policy. Investors who hope to yield long-term return, should pick historical data, and learn the resultant change that happen only a few months after the policy announcement. The authorities should also take note of the intensity of the policy change, trying their best to achieve its economic goal at once, which would avoid rippling vicious effect and panic among the public.