A study of the massive bull market in gold that occurred during the 1970s reveals that gold's run-up to its all-time high price of the 20th century happened right when interest rates were high and rapidly rising. Short-term interest rates, as reflected by one-year Treasury bills (T-bills), bottomed out at 3.5% in 1971. By 1980, that same interest rate had more than quadrupled, rising as high as 16%. Over that same time span, the price of gold mushroomed from $50 an ounce to a previously unimaginable price of $850 an ounce. Overall during that time period, gold prices had a strong positive correlation with interest rates, rising right in concert with them.
