by Craig Hemke, Sprott Money:
Why Gold Prices Are Rising Again
If you’re wondering why the gold price is screaming higher for the second consecutive year, look no further than the policies being pursued by the U.S. Fed and Treasury. Yes, rate cuts are pending but so is a policy of Yield Curve Control. These two factors will combine in 2026 to create prices that we could only imagine were possible as recently as a few years ago.
If you’re a regular reader of these weekly columns, you’ll know that we’ve long considered Yield Curve Control to be the endgame policy of the current monetary system. Besides, it’s not as if the strategy hasn’t been tried before. Coming out of World War Two and with Debt:GDP levels similar to today, Yield Curve Control was the policy from 1942-1951 as the U.S. hoped to “grow its way out of debt“.
TRUTH LIVES on at https://sgtreport.tv/
And now here we are in 2025 and the current U.S. Secretary of Treasury is using the same language:
Interest Rates And U.S. Debt Spiral
Given the latest U.S. economic data, it is now expected that the FOMC will trim the fed funds rate by at least 25 basis points when it meets next week. When this happens, it will be important to watch the reaction in the long end of the yield curve. Recall that when the Fed cut by 50 basis points last September, the long end sold off and the yield on the benchmark 10-year note ROSE by nearly a full 1% over the next three months. Could this happen again as the Fed begins cutting this autumn? Yes.
Long-term interest rates in excess of 4-5% would be a devastating blow to the U.S. economy, and it would present an extreme challenge to the attempts at managing the debt service costs of the U.S. government. The current fiscal year for the U.S. government ends this month, and total debt service costs for the year will exceed $1T for the first time. Consider how high debt service cost will climb if the U.S. loses control of its bond market.
Gold Price Projections Into 2026
As such, we can declare with confidence that an official policy of Yield Curve Control is coming in 2026 after Trump replaces Powell at the Fed and Secretary Bessent begins “melding together” the operations of the Fed and Treasury. At first, the policy may simply be one of jawboning. Recall that one of the policies created by the Fed in the Covid panic of March 2020 was to signal its intention to support the corporate bond market. At first, they didn’t even have to buy any corporate bonds. Just the signal that they would do so, if necessary, was enough to turn things around.
The same would probably be true with Yield Curve Control when it’s first announced. Just an official statement that “the Fed and Treasury stand ready to support the treasury market” would likely be enough to drive bond buying and cap yields. Direct intervention would be needed later as debt levels continue to climb, but to begin with, simple jawboning might get the job done.
Buy Gold And Silver To Hedge Against Yield Curve Control
Either way, as the Fed cuts short rates in 2026 and as Yield Curve Control caps rates on the long end, the U.S. will begin a regime of sharply negative inflation-adjusted or “real” interest rates. Negative real rates have historically provided a backdrop for surging gold and silver prices, and just the likelihood of this eventuality is what’s driving prices in 2025. Can you even imagine the impact on prices as the policy becomes reality in 2026?
