Under the Fed's Tightrope All Roads Lead to Gold -

For months, I’ve argued that the Federal Reserve is in <a href="https://www.moneymetals.com/news/2026/03/19/gold-the-federal-reserve-and-a-catch-22-004773">a Catch-22</a>. Now, some more prominent people in the mainstream are echoing this warning.
In a recent interview with Kitco News, Sprott Inc. President Ryan McIntyre said the Fed is “walking a tightrope” and has few viable policy options. He said that scenario will ultimately drive investors to gold.
Most mainstream analysts assume the central bank will hold rates higher for longer due to the inflationary pressure introduced by the U.S-Iran war. There is even growing speculation that the Fed will raise rates this year. Several <a href="https://www.moneymetals.com/news/2026/06/01/rate-hikes-the-right-medicine-at-the-wrong-time-004954">Fed officials have started laying the groundwork for a rate hike</a>.
However, it’s not as simple as that.
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An economy dominated by <a href="https://www.moneymetals.com/podcasts/2025/11/12/the-debt-black-hole-004473">a Debt Black Hole</a> doesn’t function very well in a high (or even a normal) interest rate environment.
The central bankers at the Federal Reserve face a tough choice. They can either keep monetary policy tight – holding rates higher for longer or even raising rates – to tamp down price inflation, or they can ease monetary policy to take pressure off this debt-riddled bubble economy.
They can’t do both.
And that, ladies and gentlemen, is the Catch-22.
McIntyre said we’ve never faced a situation “where everything is like walking a tightrope.”
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“You don’t want inflation, so you have to keep rates somewhat high. Conversely, you don’t want the economy to slow down too much, so you’ve got to keep rates somewhat low.”
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He emphasized that this is a precarious situation, and it puts the Fed in “a tough spot.”
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“And by the way, if either of those goes too far out of range, then you risk losing control of bigger things.”
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McIntyre said it was a “coin flip” whether the central bank would hike rates before the end of the year.
The U.S.-Iran conflict has created stiff headwinds for gold. After an initial safe-haven bid that <a href="https://www.moneymetals.com/gold-price">sent the yellow metal over $5,000 an ounce</a> as the war kicked off, gold has faced selling pressure that has driven the price to the $4,500 range with significant volatility. The gold price swings with every war headline.
History is playing out once again, as <a href="https://www.moneymetals.com/news/2026/03/03/how-has-war-impacted-the-gold-price-in-the-modern-era-004733">wars have typically had little impact on the gold price</a> after the initial bump. Other factors take control, and in this case, it is interest rate expectation.
Before the war, most people expected additional easing by the Fed. Now, a rate hike seems more likely due to rising prices stemming from the oil shock. McIntyre indicated he was surprised by the speed of the shift in sentiment.
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“People shifted from asking how many cuts we are going to get to whether there could actually be rate increases this year. It’s incredible how expectations have shifted in a couple of months.”
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McIntyre said he thinks pressure on gold from the threat of higher yields is temporary. He argues the structural bull market remains intact because there is a bigger problem than inflation – the aforementioned debt black hole.
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“To me, the most existential threat remains the sovereign debt risk.”
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He called <a href="https://www.moneymetals.com/news/2026/03/19/national-debt-quietly-eclipses-39-trillion-004774">the U.S. government's debt situation</a> one of the “most underappreciated risks” in global markets, noting that <a href="https://www.moneymetals.com/news/2026/05/04/debt-to-gdp-eclipses-100-percent-and-its-actually-worse-than-that-004888">debt-to-GDP has climbed above 100 percent</a> and is close to levels last seen during World War II. He warned, “We will cross the threshold where the net interest expense as a percentage of GDP exceeds the nominal growth rate in GDP, meaning the growth rate can’t even cover the net interest.”
Interest on the national debt set a record last year, costing $1.2 trillion. The federal government is <a href="https://www.moneymetals.com/news/2026/05/14/tax-revenues-drive-april-budget-surplus-even-as-spending-keeps-going-up-004918">forking out more for interest payments each month</a> than it is for national defense or Medicare. The only spending category bigger than interest on the debt is Social Security.
The debt-inflation duo leaves policymakers with little flexibility. If it raises rates, it could further destabilize a shaky bond market and crush equity valuations. On the other hand, cutting rates could unleash more price inflation.
It also creates a “conundrum” for investors. They will require higher real yields to invest in increasingly riskier equities. But rising yields put strain on the broader financial system.
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“If yields start getting higher, that is going to be very difficult for equities — meaning the S&P 500 — to do well. You start discounting those future cash flows at higher rates, and it accentuates the punishment.”
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The bond market is already flashing warning signs, with yields rising even without a Fed hike.
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“You start to get these warning signs from the bond markets saying we need more yield to compensate for the financial outlook here. Because the fiscal picture doesn’t look great — and they’re right.”
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What’s the alternative?
McIntyre said, “All roads lead to gold.”
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“The longer we spend not addressing our spending problem, the tougher the road is going to be. And again, there’s only one thing that’s sort of at the end of that equation, and that is gold.”
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He noted that despite the two-year bull market, most Western investors “remain dramatically underallocated to the precious metals sector.” Meanwhile, gold ETF holdings remain below all-time highs.
McIntyre concluded that gold is one of the few assets positioned to benefit no matter what the Fed does.
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“The options narrow in terms of what you can do. And that’s why we continue to think all roads will lead to gold.”
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