Judy Shelton on Fed Rate Cuts, Gold Reserves, and Economic Growth for 2026

Market Performance and Fed Outlook

• 📈 The final trading week of 2025 sees major indices posting double-digit gains for the year, driven by the AI boom, strong economic growth, and three Fed rate cuts.
• 💡 The market anticipates the next Fed rate cut will occur in April, with a new Fed chair expected to be appointed.

Economic Growth and Inflation Dynamics

• 🧠 The current economic situation is characterized by tremendous GDP growth and decreasing inflation, with the anticipated tariff-driven inflation not materializing.
• 🎯 A key debate at the Fed will be between maintaining the old model of a trade-off between inflation and unemployment versus embracing a supply-side economic growth agenda.
• 💰 The supply-side approach requires access to capital for the private sector and assumes economic growth can occur without inflation, necessitating lower rates to empower productive growth.

Federal Reserve Chair Candidates and Independence

• ⚖️ Among the potential candidates for Fed chair, Kevin Hassett is seen as the market's consensus pick, but concerns remain about maintaining the perception of independence.
• ⚠️ It's crucial to counterbalance strong GDP growth, which typically signals inflation, by addressing structural issues in housing, healthcare, and energy that are currently driving inflation, rather than demand.

Gold Reserves and Monetary Policy

• 🥇 Gold hit record highs in 2025, with silver also reaching multi-year highs, as investors sought safe havens.
• 💰 The Fed's potential reduction in interest rates makes gold and the US dollar competitors, as lower dollar interest rates make gold more attractive.
• 🏦 The U.S. holds significant gold reserves, valued at approximately $1.2 trillion at current prices, which represents a substantial understated asset on the Treasury's books.
• 🌍 The U.S. possesses a dual strength in holding the world's dominant currency (the US dollar) and being a major holder of gold, the second most prominent reserve asset globally, which should be leveraged as soft power.