Grant Cardone Shares A Chart That Indicates The Fed Will Drop Rates: 'Gold Is Acting Like We Are In A Depression'

Tariffs have created plenty of economic uncertainty, but inflation numbers have actually been good so far. According to the U.S. Bureau of Labor Statistics, the consumer price index increased by 2.4% year-over-year in March.

Steady inflation has increased speculation that the Fed will eventually cut interest rates. However, real estate investor Grant Cardone believes that big rate cuts are guaranteed. He posted a chart on X to strengthen his claim.

"Gold is acting like we are in a depression. Rates will drop like a rock," Cardone explained.

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The chart shows gold going from $2,000 per ounce near the end of 2023 to more than $3,300 per ounce today. It also shows that gold's price has soared ever since the trade war began.

Gold Is Viewed As A Safe Haven

Many investors retreat into precious metals like gold and silver when financial markets become uncertain. Tariffs have resulted in sharp price swings in the stock market, along with a weakening U.S. dollar. When the dollar gets weak, gold gains value.

The sharp rise in gold may signal that investors are fearful of the future and don't want to get caught holding equities. Gold also performed well when Trump used tariffs during his first term. For instance, the S&P 500 lost more than 15% of its value from Aug. 31, 2018, to the end of 2018. Gold rallied by about 7% during the same stretch.

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The Previous Trade War Suggests Rate Cuts Will Come In A Few Months

The time between August and December 2018 is important because it relates to Trump's first-term tariffs. The Federal Reserve raised interest rates twice during those few months. A 0.25% on Sept. 27, 2018, set the stage for a 0.25% hike on Dec. 20, 2018. It was a part of the Fed's multiyear effort to raise rates after keeping them at record lows for several years.

The Fed made those rate hikes amid a trading war between the U.S. and China that started in January 2018. Now, we find ourselves in a trade war that started in February. It's more dramatic than the first one, hence gold's strong year-to-date gains. 

Although the Fed raised rates several times in 2019, they reduced rates three times in 2019 due to the trade war. The rate cuts came in August, September, and October of that year. Each rate cut was a 0.25% drop. Although the S&P 500 was battered in 2018, it delivered a return of nearly 30% in 2019. 

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If history repeats, the stock market may generate robust returns in 2026, but that remains to be seen. For now, Cardone believes the Fed will have to reduce rates. If inflation readings remain low, the Fed will have enough flexibility to cut rates. A big rate drop can help equities rally. 

Not Everyone Thinks The Fed Will Cut Rates

Some replies under Cardone's X post were a bit skeptical. Some people believe the Fed will hike rates to keep inflation at bay. That scenario could risk stagflation, a popular talking point in 2022. 

The Fed wasn't afraid to raise interest rates during Trump's first trade war. The same scenario can unfold again, but the Fed may end up making sharp cuts in 2026, just as they did in 2019. While three 0.25% drops may not sound like much, the Fed reduced the federal funds rate from the 2.25%-2.50% range to the 1.50%-1.75% range.

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