(Kitco News) – It’s been a frustrating four months for precious metals investors since the Iran War caused inflation expectations and rate hike projections to rise. But the lows of the year for gold and silver prices are already in, and gold and silver should begin benefitting from the long-term rally’s drivers once again, according to Craig Hemke at Sprott Money.
Hemke noted that 2026 began with the expectation of additional rate cuts from the Federal Reserve. “Price inflation was continuing to slow from the highs of 2022, and it was expected that the Fed and whoever was chosen to replace Jerome Powell would begin to cut rates by mid-year, with perhaps as many as two fed funds rate cuts by year end,” he wrote. “That all changed with the onset of the Iran War and the sharply higher energy prices that came with it.”
But Hemke’s analysis indicates that the precious metals’ period of weakness may be coming to an end, and that the market actually hit ‘Peak Hawkishness’ in the days immediately following the June FOMC.
“To summarize, the notion behind ‘Peak Hawk’ was that the idea of multiple rate hikes was delusional,” he said. “Could one rate hike later this year be possible? Sure. Anything's possible and you never know for certain what the future holds. Again, think back to how things looked on February 27 before the war began.”
But Hemke said the idea that we would see multiple rate cuts in 2026 was always unlikely. “[A]fter the Iran War began, the crude oil price surged from $65 to $110, and this rightly dragged inflation expectation higher,” he noted. “But with the cessation of (most) hostilities last month, the crude oil price has round-tripped back to $68.”
“Accordingly, the energy component of the CPE (the Fed's favorite inflation measure) spiked 21% from March to May,” he pointed out. “But now that the crude oil price is back to pre-war levels, why shouldn't we expect a sharp drop in the months ahead?”
Hemke said that as these inflation concerns ease, the risk of Fed rate hikes will continue easing as well. “Though a symbolic hike is still possible in the months ahead, it's quite likely that Fed policy will soon shift back to what Warsh was originally selected to produce, namely rate cuts that allow for lower net interest costs and negative real interest rates,” he said. “If I'm correct about this, the gold and silver price lows of late June are very likely to be the price lows of 2026.”
Hemke cautioned, however, that he is not expecting to see a sharp V-shaped recovery in gold and silver prices.
“The chart damage has been significant as prices remain in a technically-bearish configuration and below all of the key moving averages,” he said. “Simply moving sideways from here can run out the clock of the bearish indicators and begin to shift sentiment, and that's what I'm expecting for a while.”
Hemke suggested investors watch the 20-day moving average for clues about the precious metals’ price direction. “If/when gold and silver move back above this initial trend indicator, you can begin to grow in confidence that the lows of the year are behind us.”
“In summary, with the Iran War ending and energy prices falling, the second half of 2026 is likely to see CPI and PCE price inflation that comes in below expectations,” Hemke wrote. “This will signal that "Peak Hawkishness" has come and gone and that gold and silver investors can soon get back to focusing upon the fundamentals that had driven prices higher in 2024 and 2025.”
