Rate Cuts & War Will Push Gold Higher
The war in the Middle East continues to escalate, threatening the entire region with an all-out conflict that, should it boil over, is almost certain to lead to heavier US involvement. All eyes are on Israel and Iran. Meanwhile, as the presidential election nears, the Fed and other central banks are desperate to cut rates to avert a recession or even a full-blown crisis. With these factors in play, the price of gold has plenty of room to run headed into 2025.
The Fed’s money printers will run for both reasons: Keep funding war aid for Israel, and juice the low rate-addicted economy. Though optimistic reports claim that Middle East tensions may be “easing”, it’s only because a recent battle between Israel and Hezbollah occurred without any major escalation. This is a tiny and isolated point.
The exchange of fire was one of the largest clashes so far, and only one of several that Hezbollah has vowed. The next could become the spark that expands the conflict into a much larger and more terrible war
While the yellow metal has dipped in the short-term, I’m not thinking about the one-day chart. Gold has seen a powerful one-year rise, and the macro factors have only gotten hotter. Gold will keep absorbing more of the uncertainty from the chaos in the Middle East. And with the money printers now ramping up among election season uncertainty, global tensions are likely to push prices to new all-time highs later this year.
Gold 1-Year Chart
Pundits are claiming that the Fed damaged the economy by waiting too long to raise rates. Politicians have also been begging for a rate cut, especially on the left, where desperation is mounting by the incumbent party to stay in power. With a chorus of blame by politicians and mainstream media zeroing in on made-up “corporate price gouging” as the cause of high prices, the usual suspects are completely clueless that their own monetary policy and state intervention are what cause inflation to begin with.
Rising prices are nowhere near under control, and to bring them back down, a free market would have raised interest rates far above any rate that the Fed would dare set. But if the Fed doesn’t cut soon, the entire economy sputters and banks start to implode under the weight of their own overleveraged bets and practical insolvency.
Instead of blaming grocery chains and other retailers with razor-thin margins, pundits should be blaming the same Fed they’re groveling at for lower interest rates. They think the Fed can save the economy, not realizing that the paper boat is doomed to sink either way, and both scenarios were caused by the same central planning that they’re begging for even more of.
Thank the Fed for its addiction to money printing, the Treasury and government for their addiction to spending, and the war hawks for their addiction to conflict — higher inflation means a higher price for gold. Unfortunately, for most who aren’t ready, they’re about to see even more of their hard work and purchasing power be stolen from them. Economic cost is human cost. And for millions of people living in the Middle East, the human cost of further escalation could be devastating beyond measure.
