When the Treasury and the Federal Reserve decide to let the economy "overheat," is gold aiming for $6,000?

As U.S. policymakers shift towards more aggressive economic stimulus strategies, the market is facing a significant macroeconomic transformation that could push gold prices to a historic high of $6,000 per ounce.

Financial analyst and precious metals expert Craig Hemke predicts that under the leadership of the Trump administration, the Treasury and the Federal Reserve will jointly implement a strategy to "overheat the economy" by 2026, aiming to resolve debt issues through rapid growth. This move is expected to become the strongest catalyst for the precious metals market.

In an interview with Greg Hunter, Hemke pointed out that U.S. authorities have abandoned earlier plans for fiscal tightening and balanced budgets, opting instead to dilute debt pressure through rapid GDP growth. Treasury Secretary Becerra recently stated that the goal is to reduce interest payments as a percentage of GDP from the current 6% to 3% through economic growth. To achieve this, the market expects Trump to appoint a compliant new Federal Reserve Chair to replace Powell in May, who will closely coordinate with the Treasury to stimulate short-term growth through interest rate cuts.

The core risk of this policy shift lies in the resurgence of inflation and soaring long-term interest rates. Hemke warns that if inflation leads to uncontrolled long-end rates, U.S. authorities are likely to restart the "yield curve control" policy implemented after World War II. Under this mechanism, the Federal Reserve would set an interest rate cap and purchase government bonds at that price, artificially suppressing nominal rates. In an environment of high inflation and locked nominal rates, real rates would turn negative.

Negative real rates are seen as the most critical driver for rising gold prices. Based on this macro path forecast, Hemke expects gold to reach at least $6,000 by 2026, while silver is likely to break through $130. Additionally, the ongoing de-dollarization and gold-buying spree by global central banks, along with resilient industrial demand, are providing solid bottom support for precious metal prices.

Policy Shift: From Tightening to "Overheating"

The underlying logic of U.S. economic policy is undergoing a fundamental reversal. Hemke recalls that just a year ago, the market was discussing a $2 trillion spending cut plan and balanced budget goals led by the "Department of Government Efficiency" (DOGE), but authorities quickly realized that this tightening path was difficult to implement. The current strategy has completely shifted to "growth breakthrough," aiming to alleviate debt burdens by maximizing economic growth.

This shift will be solidified through personnel changes. Hemke predicts that as current Federal Reserve Chair Powell's term ends, his successor will be more inclined to align with the Treasury's wishes, deeply integrating monetary policy with fiscal policy.

This coordination aims to ensure that short-term rates remain low, creating conditions for an "overheated" economy, attempting to replicate the growth path described by Becerra, which involves reducing the debt cost ratio by enlarging the GDP denominator.

Potential Tool: Yield Curve Control

Aggressive growth strategies often come with the side effect of rising inflation, which may lead to upward pressure on long-term government bond yields. Hemke cites Japan as an example, noting that after abandoning yield curve control, rates soared, while the U.S. is heading in the opposite direction He believes that once long-term interest rates rise due to inflation expectations, the Federal Reserve will not be limited to manipulating short-term rates but will implement yield curve control.

According to Hemke's analysis, the Federal Reserve may 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 inflation continues to rise amid an overheating economy. This combination would directly lead to real interest rates (nominal rates minus inflation) falling into negative territory, which historically has been the most favorable macro environment for gold.

Central Bank Demand Builds a Solid Bottom

In addition to macro policy drivers, the gold purchasing behavior of global central banks constitutes another important pillar of the precious metals market. Hemke points out that since the outbreak of the Russia-Ukraine conflict in 2022, when the U.S. kicked Russia out of the SWIFT system and froze its foreign exchange reserves, global central bank demand for gold has set records for four consecutive years. Concerns over the safety of dollar assets have prompted countries to sell U.S. Treasuries and increase their holdings of physical gold.

This trend continues into 2026. The National Bank of Poland recently announced it will purchase an additional 150 tons of gold, bringing its gold holdings to 700 tons. Hemke emphasizes that as long as geopolitical risks and concerns over the weaponization of the dollar persist, strong buying from global central banks will continue to support gold prices. Coupled with strong industrial demand for silver, the precious metals market is in a long-term bull market that began in 2024, with upward momentum unabated.