As US policymakers pivot towards more aggressive economic stimulus strategies, markets are confronting a significant shift in the macroeconomic environment, a shift that could propel gold prices to a historic high of $6,000 per ounce.
Financial analyst and precious metals expert Craig Hemke predicts that under the Trump administration, the Treasury and the Federal Reserve will jointly pursue a strategy to "overheat" the economy by 2026, aiming to address debt issues through rapid growth; this move is anticipated to be the most potent catalyst for the precious metals market.
Hemke pointed out in an interview with Greg Hunter that US authorities have abandoned earlier plans for fiscal austerity and balanced budgets, instead betting on rapid GDP growth to dilute debt pressure. Treasury Secretary Bassent recently stated publicly that the goal is to reduce the interest expense-to-GDP ratio from the current 6% to 3% through economic growth. To achieve this, markets expect Trump to appoint a compliant new Fed Chair in May to succeed Powell; the new Chair is expected to work closely with the Treasury, stimulating short-term growth through interest rate cuts.
The core risk of this policy shift lies in the re-ignition of inflation and a surge in long-term interest rates. Hemke warned that if inflation causes long-end rates to spiral out of control, US authorities are highly likely to reintroduce the "Yield Curve Control" policy implemented after World War II. Under this mechanism, the Fed would set a cap on interest rates and buy government bonds at that price, thereby artificially suppressing nominal rates. In an environment of high inflation and locked-in nominal rates, real interest rates would turn negative.
Negative real interest rates are considered the most crucial driver for rising gold prices. Based on this anticipated macro path, Hemke expects gold to reach at least $6,000 by 2026, while silver could break through $130. Furthermore, sustained de-dollarization gold purchases by global central banks, coupled with resilient industrial demand, are providing solid underlying support for precious metal prices.
The underlying logic of US economic policy is undergoing a fundamental reversal. Hemke recalled that just a year ago, markets were discussing a $2 trillion spending cut plan and balanced budget goals led by a "Department of Government Efficiency" (DOGE), but authorities quickly realized this austerity path was unfeasible. The current strategy has completely shifted to a "growth breakout," aiming to resolve the debt burden by maximizing economic growth.
This shift will be solidified through personnel changes. Hemke predicts that as the term of current Fed Chair Powell ends, his successor will be more inclined to align with the Treasury's wishes, deeply integrating monetary and fiscal policy.
This coordination aims to ensure short-term interest rates remain low, creating the conditions for economic "overheating," attempting to replicate a growth path similar to that described by Bassent, where increasing the GDP denominator lowers the proportion of debt costs.
Aggressive growth strategies often come with the side effect of resurgent inflation, which could put upward pressure on long-term government bond yields. Hemke cited Japan as an example, noting that its interest rates soared after abandoning Yield Curve Control, while the US is heading in the opposite direction. He believes that once long-end rates rise due to inflation expectations, the Fed will go beyond manipulating short-term rates and implement Yield Curve Control.
According to Hemke's analysis, the Fed might announce a cap on the 10-year Treasury yield at a specific level (e.g., 4%) and commit to intervening in the market as a buyer to maintain that rate. This would result in nominal rates being capped by policy, while the inflation rate continues to rise amid an overheating economy. This combination would directly lead to real interest rates (nominal rate minus inflation) falling into negative territory, historically the most favorable macro environment for gold.
Beyond macro policy drivers, gold buying by global central banks constitutes another crucial pillar for the precious metals market. Hemke noted that since the outbreak of the Russia-Ukraine conflict in 2022 and the US removing Russia from the SWIFT system and freezing its foreign reserves, global central bank demand for gold has hit record highs for four consecutive years. Concerns about the safety of dollar assets are prompting countries to sell US Treasuries and increase their holdings of physical gold.
This trend is expected to continue into 2026. The National Bank of Poland recently announced it would purchase an additional 150 tonnes of gold, increasing its holdings to 700 tonnes. Hemke emphasized that as long as geopolitical risks and concerns about the weaponization of the dollar persist, robust buying from global central banks will continue to support gold prices. Combined with strong industrial demand for silver, the precious metals market is in a long-term bull market that began in 2024, with its upward momentum unabated.
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