Reality Check! -

The perception is that gold has tanked through the first half of the year. 
In fact, the yellow metal isn't down nearly as much as you probably think.
The perception is that the new Federal Reserve chairman will keep monetary policy tight to fight inflation. 
In fact, the Debt Black Hole may have something else to say about that.
In this week's Midweek Memo podcast, host Mike Maharrey provides a reality check, showing that gold's correction isn't nearly as steep as you might think and throwing cold water on the notion that Kevin Warsh will maintain a higher interest rate environment and slay inflation. 
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Mike opens the show by referencing the hot summer weather. 
<blockquote>
We’re getting into the hottest time of the year down here in west-central Florida. This is when we start dreaming of a cool front. With the heat dome that was recently parked over the U.S., I bet a lot of you are looking forward to the next cold front, too. It’s always kind of funny when the first real dip of cool air hits down here. It’s usually in October. It will get down to like 59, and suddenly you learn that all your neighbors own hoodies and boots. Yes. I said 59. And you’re right. That’s not really cold. But after 5 months of 90-degree days. And I mean every day – 59 feels downright frigid. It’s a matter of relativity, right? Sometimes things that aren’t extreme seem extreme because you’re coming off another extreme. That’s kind of what’s happened with the gold market this year."
</blockquote>
Mike notes that it feels like gold has tanked through the first half of the year. 
<blockquote>
"But it’s kind of like the temperature story I told a few minutes ago. The drop in the gold price seems extreme because we came off such an extreme rally. In reality, while it’s down a bit, gold hasn’t really dipped all that much. And despite the steep correction and increased volatility, gold remains one of the best-performing assets over the last 12 months."
</blockquote>
Mike notes that gold is only down 7 percent since January 1. It feels like a bigger correction because gold soared in early January, setting 12 new all-time highs in a matter of weeks. 
<blockquote>
"So, since the record highs of early January, gold is down nearly 30 percent. But much of that was the result of the crazy run-up just weeks before."
</blockquote>
Mike points out that even with the correction, gold has still outperformed every major asset class except emerging market stocks over the last 12 months. 
Mike reminds listeners that corrections are normal and healthy in a bull market. 
<blockquote>
"The dynamics that drove gold to record highs remain firmly in place."
</blockquote>
Mike references World Gold Council analysts who think gold will remain range-bound until something moves the market one way or another. He says that "something" will be the reality check when people realize the Fed can't slay inflation and keep the bubble economy inflated. 
Speaking of the Fed, the new chairman has been talking tough about inflation lately. 
<blockquote>
"It’s pretty clear Kevin Warsh is bound and determined to make sure you know absolutely without a doubt that he is going to not only kill inflation – but grind it into the ground! Or at least get it back to 2 percent – the preferred rate of monetary debasement. Anyway, I’ll give it to the man; he talks tough. The question is, will he be willing and able to back it up?"
</blockquote>
At a recent conference, Warsh emphatically insisted that the central bank will "deliver price stability."
<blockquote>
"The hawkish talk has put a significant drag on the gold and silver markets. Just a few months ago, virtually everybody expected another rate cut this year. Sentiment has now flipped, with most people expecting a rate hike before the end of the year. Since gold is a non-yielding asset, a higher interest rate environment is considered a bearish setup. Warsh seems to have the will to tackle price inflation, but what happens when his will clashes with reality?"
</blockquote>
Mike points out that everybody convinced that Warsh will deliver on his hawkish rhetoric seems to be ignoring the reality of the <a href="https://www.moneymetals.com/news/2025/11/15/debt-black-hole-putting-increasing-stress-on-american-consumers-004483">Debt Black Hole</a>. 
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<blockquote>
"Simply put, the economy is addicted to artificially low interest rates and money creation. Sure, Warsh can take the drug away, but that would send the addict into withdrawals, a painful prospect. This is the Catch-22 facing the Fed that I’ve been talking about for well over a year. It must choose. It can tackle inflation and risk popping the debt bubble and toppling the economy, or it can try to keep the economy limping along with looser monetary policy. It can’t do both."
</blockquote>
Mike says he thinks Warsh is right to draw a line in the sand when it comes to price inflation. However, he's almost certainly going to run headlong into political realities. 
<blockquote>
"Voters get unhappy with economic pain very quickly. Politicians don't like unhappy voters. You can see the problem here. So yes. Kudos to Warsh for his apparent commitment to 'price stability,' but he seems to be ignoring the political realities."
</blockquote>
The reality is that politicians have short time horizons — up to the next election cycle. They are not incentivized to solver long-term problems, especially if the solution will require pain. 
<blockquote>
"Recessions are painful but necessary. They clean out malinvestments and resource misallocations resulting from monetary miscalculations. But recessions upset people, and politicians don’t like upset people. So instead of letting recessions play out, they turn to stimulus in an effort to reinflate the bubbles and ease the economic pain. This effectively kicks the can down the road and sets the stage for a bigger bust in the future. This creates a vicious cycle. Each monetary intervention increases the size of the bubbles and malinvestments. That means they have to implement bigger interventions to keep the bubbles inflated when the economy starts turning sour."
</blockquote>
Mike notes that we still haven't reckoned with the malinvestments and bubbles created by the extraordinary monetary policy after the 2008 financial crisis, much less the doubled-down extraordinary monetary policy implemented during the pandemic. 
Mike quotes Waratah Capital Advisors cofounder and CIO Brad Dunkley, who said, "The debt's too high, so they can't let interest rates go up. They're just going to run it hot. They're going to print money."
<blockquote>
"They've shown us time and time again — no pain is allowed. No recessions are allowed to happen. Unemployment's not allowed to happen. Bad things happen? We'll just send you money. Go spend it, everybody."
</blockquote>
Mike says that while this isn't the wise economic strategy, it is the politically expedient approach. 
<blockquote>
"People turn on politicians quickly during economic downturns. Since politicians are driven by short-term incentives (getting re-elected), allowing pain to continue is not an option."
</blockquote>
Ultimately, it's about trade-offs, something politicians and central bankers like to avoid. They want to pretend their policies have no negative consequences. 
Warsh's apparent commitment to slaying inflation is laudable, but history tells us he's highly unlikely to follow through. Even Alan Greenspan, a gold bug, turned on the monetary printing press as Fed chair when push came to shove. 
<blockquote>
"I don't guarantee much, but I will guarantee your dollar will be worth less than it is today."
</blockquote>
That's why Mike says now is the time to call 800-800-1865 and talk with a Money Metals precious metals specialist. Get real money — gold and silver — today.
<h2>Articles Mentioned During the Show</h2>
<a href="https://www.moneymetals.com/news/2026/03/19/gold-the-federal-reserve-and-a-catch-22-004773">The Federal Reserve's Catch-22</a>
<a href="https://www.moneymetals.com/news/2026/06/26/alan-greenspans-great-bailout-machine-005013">Alan Greenspan's Great Bailout Machine</a>
<a href="https://www.moneymetals.com/news/2026/06/29/a-deep-dive-does-government-job-data-reflect-reality-005018">A Deep Dive: Does Government Job Data Reflect Reality?</a>

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