by Craig Hemke, Sprott Money:
Geopolitical Tensions And Gold Silver Market Reaction
The initial reaction to the U.S war on Iran has been to sell treasuries and buy the dollar in a market expectation that higher crude oil prices will bring inflation and higher interest rates from the Federal Reserve. This analysis is dead wrong.
But “the market” has adopted this thinking over the past week, and precious metal prices have been hammered. Is the downward price pressure justified? Only if you see the world in a vacuum—like a pre-programmed HFT trading algorithm. If you’re an actual thinking human being, you might see it differently.
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That’s not to say there won’t be a short-term inflationary impact. There almost certainly will! However, no one should be under any illusion that long-term U.S. fiscal and monetary policy has changed. As we laid out in our 2026 forecast, the Trump administration pivoted away from austerity and budget cuts in 2025 and toward the promotion of economic growth. “They’re going to run it hot” is the shorthand most analysts use for these expectations. If you missed our annual forecast back in early January, here is the link:
Federal Reserve Policy Inflation Expectations
Nothing about the events of the past ten days changes this forecast. In fact, the past ten days of geopolitical strife have only served to accentuate it. While higher oil prices impact nearly every sector of the economy, the uncertainty and inflation attendant to higher oil prices will almost certainly lead to slower economic growth. Just last Friday, the U.S. reported massive job losses for the month of February, and the recent economic data has been so poor that the Atlanta Fed has had to trim their Q1 GDP estimate by over a third. And we still have over six weeks of data left to consider before the official Q1 GDP numbers are released. Could actual “growth” in Q1 come in as negative as the recent employment reports?
Evolution of Atlanta Fed GDPNow real GDP estimate for 2026: Q1
As such, with the U.S economy already on shaky ground, the war with Iran only makes it worse. The market infers that the Fed will hike rates to control expected inflation, and this is the opposite of what will happen. Instead look for the Trump Fed to begin cutting rates by summer. In fact, they may even cut faster and deeper than analysts and economists currently expect.
Gold Price Technical Analysis And Trends
This leads to the conclusion that the initial price reactions in gold and silver are all wrong too. We’ve been told that the precious metals are falling in price due to the expectation of higher interest rates. So what happens when “the market” figures out that rates are far more likely to be cut instead?
To my point: I’m expecting another major and tradable low here, either this week or next. On the chart below, you can see that the spot gold price has steadily progressed higher over the past year, often finding support at/near its 20-day moving average. It’s doing so again as I type on Monday, March 9.
