① Gold prices have fallen below $4,300 per ounce, and the precious metal faces further downside risks amid expectations that the Federal Reserve will raise interest rates this week; ② However, Sprott executive Ryan McIntyre argues that gold serves as a "North Star" for monetary assets, noting that institutional investors currently hold insufficient gold positions and that rising fiscal uncertainty is likely to boost demand.
The gold market opened the new trading week at a one-month low, with prices falling below $4,300 per ounce. With a Federal Reserve rate hike this week all but assured, the precious metal faces further downside risk. However, one fund manager argues that investors fixated on the next 25-basis-point move are overlooking the bigger picture.
Ryan McIntyre, a senior managing partner at Sprott Inc., an asset management firm focused on precious metals and critical materials, said in a recent interview that, in a world where sovereign debt continues to rise and fiscal stability is increasingly eroding, gold remains the "North Star" of monetary assets—serving as a guiding benchmark, or pricing anchor.
Despite gold's strong performance this year, McIntyre notes that holdings of the precious metal remain severely inadequate, particularly among U.S. institutional investors. He adds that, amid mounting geopolitical and fiscal uncertainties, gold's performance may ultimately compel investors to reassess its role as a portfolio‑diversification tool.
McIntyre stated that the ultimate catalyst for broader investment demand could be a reassessment of financial risks, which might be triggered by rising bond yields or a weakening stock market. He noted that, despite higher long-term yields, investors have so far been surprisingly reluctant to reevaluate the valuations of their portfolios.
He further noted that investors should closely monitor the relationship between economic growth and the government's steadily rising interest expenditures.
"My view is that once U.S. interest payments exceed the nominal growth rate, problems will arise, because you simply won't be able to service the debt. Economic growth won't be enough to offset interest expenses," he said.
McIntyre stated that, with nominal economic growth hovering around 4%, the government's regular interest‑payment burden is dangerously approaching this threshold. At the same time, he noted that bond markets are already signaling a waning of policymakers' ability to manage long-term interest rates.
He believes that, unless the government fundamentally reforms deficit‑driven spending, the fiscal outlook will remain unstable. However, he added that a sharp fiscal tightening could also dampen economic growth, creating an increasingly difficult policy dilemma.
Impact of Interest Rate Hikes
Against this backdrop, McIntyre stated that as fiscal risks rise, the conventional argument that higher interest rates increase gold's opportunity cost has become less compelling.
"As fiscal uncertainty intensifies, the case for nominal interest rates will gradually lose its footing," he said. "For people, there is only one natural way to hedge against such uncertainty: gold. We know that gold serves as a pressure-release valve—this is abundantly clear. There is no viable alternative."
McIntyre expects that these pressures will ultimately drive investment demand to new highs.
"I believe gold holdings in ETFs will reach all-time highs," he said, adding that the fiscal situation "is undoubtedly becoming increasingly precarious."
Moreover, this issue is not confined to the United States. The fiscal risks confronting some of the world's largest economies and currencies have further reinforced gold's status as an asset that carries no sovereign debt risk.
"That's precisely why gold will serve as a hedge against stress, because there really are no other alternatives," he said.
Turning to the outlook for a September rate hike, McIntyre noted that the ultimate outcome may not align with investors' expectations, as policymakers must balance persistent inflationary pressures against the financial implications of higher borrowing costs. Even if rates do rise, this is unlikely to have a material impact on gold prices; any weakness would probably be only temporary.
"If they raise interest rates, do I think gold prices will fall? Unlikely. Even if they do, the decline would probably be only temporary," he said. "On the other hand, if they hold rates steady, gold prices are very likely to rise."
"My outlook is long-term. The overall picture for gold has become much clearer. In the long run, the situation is far more straightforward than in the short term. Our current fiscal policy is not sound—and it's only going to get worse. That alone is enough to tell you that gold prices will rise," he added.