Gold Pricing Under Fiscal Tightening: Evidence of a Regime Change in the Post-2008 Cycle (Link)

This paper revisits the sensitivity of gold prices to real interest rates when monetary tightening occurs against a materially heavier fiscal background. The post-2008 environment contains two distinct U.S. tightening episodes (2016-2019 and 2022-2024) that differ sharply in their macrofinancial configuration. Trivariate Engle-Granger ECM and ARDL-ECM specifications are estimated using monthly data on international gold prices, interest payments, and real interest rates. In the 2016-2019 period, the system is not cointegrated: shocks dissipate rapidly and real rates exert the conventional negative influence on short-term gold variations, consistent with the standard opportunity-cost channel. By contrast, the 2022-2024 episode displays a stable longrun cointegrating relationship in which gold co-moves positively with real rates. The adjustment mechanism is driven predominantly by fiscal pressures, as interest-payment dynamics significantly dominate both the long-run equilibrium and short-run propagation. These results indicate a regime reconfiguration: rather than reacting primarily to monetary policy, gold increasingly reflects the perceived sustainability of the fiscal stance. When sustained positive real rates amplify debt-servicing burdens, gold appears to hedge the rising probability of fiscal dominance. The findings provide empirical evidence on a monetary-fiscal channel largely absent from the literature. They suggest that, under high-debt tightening, gold's valuation departs from the conventional safe-haven or opportunity-cost narratives and becomes anchored in the evolution of structural fiscal stress.