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A Closer Look: The U.S. Economy - Reading the Gold Rally: How to Prepare Your Business for 2026
by Nick Eagle, ITR Economics
Record gold prices point to building inflation, not recession risk, as the primary threat to most businesses.
Gold has a little secret. Its record-setting 2024–25 run is less about today’s economy and more about the inflation and policy pressures that will matter for your business in 2026.
Gold prices are up more than 50% year-to-date and broke above $4,000 per ounce for the first time in October. We can see in the chart below that gold prices have surged well beyond the rate of rise for consumer prices since December 2019. Gold is a poor guide to quarterly GDP; at times it has moved in the opposite direction of the business cycle. It is more useful as a gauge of what investors and central banks fear: stubborn inflation, currency debasement, and concern over government finances.
Businesses should prepare for 2026’s inflation-tinged, mild macroeconomic growth environment by focusing on their industry’s trends and increasing efficiencies or competitive advantages amid margin pressures.
As 2025 winds down, businesses are setting budgets and goals for 2026. While this year has brought its share of uncertainty — tariffs, inflationary pressures, and now a government shutdown — the broader macroeconomic landscape shows that the US economy is chugging along. For most companies, 2026 should offer an opportunity to row with the current rather than against it.
Why Gold is Surging Now
Three forces stand out:
• Central banks are diversifying. Foreign central banks now hold more gold than US Treasurys in their reserves for the first time since the mid1990s.
• Investors have rushed back in. After trimming positions in the early 2020s, investors piled into gold in 2025 as evolving US trade policy, sanctions risks, and fiscal headlines mounted, though some of that demand may ease as uncertainty cools in 2026.
• Policy and fiscal worries are building. Our analysis suggests that today’s deficits and loose conditions will translate into gradually higher interest rates later this decade. Sticky long-term yields in spite of Fed rate cuts are already reflecting that concern; gold is echoing the same story.
A Slow-Burn, Not the 1970s
It is tempting to liken this to the 1970s. While there are some parallels — namely, generally elevated inflationary pressures — there are meaningful differences as well. Today’s economy is more diversified. For example, the US is now energy independent rather than highly energy reliant on the Middle East, as it was in the 1970s. Accordingly, we do not foresee the same rates of inflation we saw in the 1970s as probable. In the 1970s, inflation did not become unsustainable in a single year; it accumulated until policy was forced to change. Our outlook is similar. We expect inflation’s effects to compound, with the real strain showing up closer to 2030. Think of gold as a future barometer, not a current thermometer. It is not reading today’s temperature; it is hinting at a pattern ahead — one of firmer inflation, higher average interest rates, and greater sensitivity to fiscal news than much of the last 20 years.
Implications for Your 2026 Planning
For most businesses, the message is not panic but preparation:
• Build room for cost pressure. Expect renewed upward pressure on wages, inputs, and financing costs as we move through 2026 and beyond. Review long-term contracts and add contingency to project budgets.
• Be deliberate with capital spending. For major projects, run scenarios under higher-for-longer interest rates and inflation generally running in excess of 2%. In some cases, moving earlier to lock in costs will make sense; in others, phased commitments and preserving flexibility will be the better choice. We are concerned that companies will view recession risk as a greater threat than the solid, if unspectacular, economic data suggests and therefore fail to greenlight the sorts of projects that save on costs, increase efficiencies, and preserve margins. Inflation, not macro recession risk, is the greater threat to most businesses.
• Review upcoming loan renewals. Higher long-term interest rates will likely raise borrowing costs later this decade. Identify when major loans or credit lines renew and plan ahead for how higher rates could affect your cash flow. Gold’s message is not that the economy is about to fall off a cliff. It is that inflation will be elevated for the remainder of the 2020s and even into the very early 2030s. Firms that adjust their pricing, cost structure, and capital plans now will be better positioned as today’s warning light becomes tomorrow’s operating reality.
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