The price of gold hit new all-time highs again today, reaching $3,860 in its continued ascent on the current trend, which makes one think how high can it go? Renowned economist Steve Hanke sees gold climbing to $6,000 in this bull cycle, citing central bank disarray and a weakening dollar. In a wide-ranging interview, Hanke warned that political pressure, especially from Trump-aligned Fed appointments, could accelerate money supply growth and erode Fed independence.
Hanke argues that markets are misfocused on interest rates instead of money supply trends, which he sees as the real inflation driver. Hanke also dismissed fears that gold needs a crisis to soar, pointing instead to structural income and monetary shifts already underway.
In recent comments, Steve Hanke, Professor of Applied Economics at Johns Hopkins University, shared his outlook on the precious metals market, particularly gold. He predicts gold could reach $6,000 per ounce by the end of this bull market cycle. This projection goes beyond other forecasts such as Goldman Sachs’ $5,000 target, which hinge on the Federal Reserve losing independence, resulting in runaway inflation. Instead, Hanke’s prediction is based on a straightforward model: anticipating the next peak in gold prices by examining the prior peak. He highlights growing U.S. disposable income as a driver for a sustained long-term bull market in gold. The metal’s recent trading patterns underline this strength, showing steady buying pressure and a breakout from a technical pattern that signals momentum.
One of Hanke’s central points revolves around the Federal Reserve and its control over money supply. He warns that political influences, particularly Fed appointments aligned with President Trump, could increase money supply too rapidly. This undermines the Fed’s traditional independence, whose role has been to manage inflation by controlling money growth. Hanke stresses that the focus on interest rate changes misses the bigger picture. Instead, the primary factor influencing inflation is the growth rate of the money supply. He observes current U.S. money supply growth as too fast and warns this could eventually spur higher inflation and push gold prices upward.
Hanke’s perspective contradicts the common perception that gold needs a full-blown crisis to surge. He dismisses this idea, arguing that the underlying shifts in income levels and monetary supply are already enough to fuel a gold bull market. This structural change means the gold rally is not just speculative but anchored in economic fundamentals. It also aligns with concerns over the weaker U.S. dollar. Gold often acts as a hedge against currency depreciation, and with competing central banks showing signs of disarray, gold’s safe-haven appeal is steadily rising. The dollar’s weakness, combined with growing political pressures on monetary policy, creates a fertile environment for gold to test new highs.
Understanding Hanke’s viewpoint requires recognizing that inflation is about more than headline interest rates or short-term market moves. It’s ultimately driven by how much money is circulating in the economy. Historically, inflation and the value of assets, including gold, track changes in money supply. When money supply grows faster than economic output, inflation pressures build, and gold becomes a preferred store of value. Hanke claims the Fed’s current policy approach risks losing control over inflation by allowing money supply growth to accelerate unchecked, especially given the political landscape.
This outlook on money supply and gold also carries significant implications for investors and policymakers. For investors, it signals that gold remains a valuable component of a diversified portfolio amid uncertainties about future inflation and monetary policy. For policymakers, Hanke’s warning underscores the risks of politicizing central bank functions, which could erode confidence in the Fed’s ability to manage inflation effectively and maintain economic stability.
Steve Hanke’s forecast is a reminder that the interplay between politics, central banking, and monetary policy is crucial to watch in the coming months. The dollar’s strength or weakness, the Fed’s independence, and the growth of money supply could together determine whether gold reaches and potentially exceeds this $6,000 mark in this cycle. The combination of rising disposable incomes and monetary shifts creates a unique scenario that could outpace past gold bull markets, making this a critical period for anyone interested in economic trends and asset markets.
