Fiat Elpis · Gold and monetary policy note 16

Long gold: why a dovish Fed hike can fuel the next move

My base case is a dovish hike: enough to acknowledge inflation, too little follow-through to restore confidence in the inflation fight.

Saâd Filali Khattabi 15 September 2026 6 min read

Fiat Elpis macro research · Ahead of the 16 September FOMC decision

My gold view is bullish. I expect the Fed to raise rates on September 16 and then soften the message around further tightening. With inflation still elevated and fresh pressure moving through the production chain, that combination can lower expected real returns on dollars and strengthen demand for gold.

01 · The long-gold thesis

The call is a dovish hike

My forecast is a quarter-point increase accompanied by an attempt to limit expectations of a sustained hiking cycle. The decision can look hawkish in isolation while the communication pushes against the tighter path investors would otherwise price. That is the setup behind my long-gold thesis.

This updates the gold view in my 30 August cross-asset note. I now put more weight on political resistance to sustained tightening and persistent supply pressure than on the credibility suggested by hawkish speeches. The issue is follow-through.

Under Warsh, the Fed held its target range at 3.50–3.75% in June and again in July. The July hold passed 9–3, with three members preferring a 25-basis-point increase. Those were policy choices made while the committee itself described inflation as elevated.¹²

Trump's preference for cheaper money is explicit. On September 4 he again demanded lower rates and pressed the Fed to act. My interpretation is that this political preference raises the hurdle for a sustained tightening cycle. I expect the committee to concede a hike while resisting the implications of a fully hawkish inflation response.⁶

“A hike can acknowledge inflation without delivering the policy needed to defeat it.”
Fiat Elpis gold thesis, 15 September 2026

02 · The policy mechanism

The inflation pressure is already visible

THE FED'S TARGET

PCE remains well above 2%

July PCE inflation was 3.7% year on year, with core PCE at 3.3%. These are the latest available PCE readings before the September decision. The inflation problem extends beyond a single energy print.⁴

THE PIPELINE

Producer prices are accelerating

August final-demand PPI rose 0.4% in the month and 5.4% over the year. Processed intermediate goods rose 1.8% in the month and 11.5% over the year; diesel prices jumped 24.1% in the month. These are substantial upstream pressures, although pass-through into consumer prices will depend on demand and margins.³

THE CONSUMER

Monthly pressure has picked up again

August CPI rose 0.4% month on month, versus 0.1% in July; core CPI rose 0.3%, versus 0.2%. Annual headline inflation was 3.4%, while annual core CPI eased to 2.4%. The renewed monthly impulse is the concern for the next stage of the inflation cycle.⁹

THE TRACK RECORD

Five years of overshooting matter for credibility

Warsh himself acknowledged more than five years of sustained elevated inflation at Jackson Hole. I put little weight on another declaration of commitment without a policy path that makes it convincing. Repeated overshoots increase the burden of proof on the Fed's willingness to finish the job.⁸

The core thesis

Political resistance to tightening meets an inflation pipeline that is still running hot. I expect a dovish hike to reduce confidence in the real return on dollars and increase the appeal of gold as a purchasing-power hedge.

03 · Why a hike can be dovish

Why a higher policy rate can still be bullish for gold

The Fed's July minutes identify past tariffs, Middle East energy and input costs, and AI-related demand among the sources of price pressure. Businesses also described absorbing some higher costs in margins, with further increases possible if the conflict continued. That is a pipeline through which today's disruption can become tomorrow's consumer-price pressure.⁵

My view is that softening the expected rate path against that backdrop does more than reduce the interest investors expect to earn. It also weakens confidence that demand will be restrained enough to prevent those costs from spreading. Less nominal restraint and more inflation compensation can reinforce each other.

A real yield is the return after expected inflation, measured over the same horizon. If the expected nominal rate path falls while expected inflation rises, expected real returns fall. Gold pays no coupon, so a weaker real return on competing dollar assets improves its relative appeal. The additional attraction is protection against a central bank that repeatedly tolerates inflation above target.

This does not require every Treasury yield to fall. Long-term borrowing costs can rise as investors demand more compensation for inflation and uncertainty. My central expectation concerns the expected real return on cash and shorter maturities, alongside a larger premium for protection against lost purchasing power.

The hike acknowledges the problem. A 25-basis-point increase gives the Fed a visible response to persistent inflation.
The message limits the follow-through. I expect Warsh to resist the conclusion that one hike must become a sustained tightening cycle. That is where the dovish surprise would sit.
The inflation pipeline keeps working. Energy, intermediate inputs and tariffs can continue feeding prices while an accommodating policy response leaves more room for pass-through.
Gold benefits from the policy mismatch. My base case is that the expected interest-rate path fails to keep pace with inflation risk, weakening real returns and supporting demand for an inflation hedge.

04 · What would change the thesis

What would change this view

The decisive test is what policy delivers after the headline hike.

Sustained tightening: the committee backs its words with further restraint, and the expected real-rate path moves persistently higher.
A repaired inflation pipeline: energy and intermediate-input pressure ease durably, followed by convincing progress in underlying consumer inflation.
A credible market response: inflation expectations fall while restrictive policy remains in place, restoring the purchasing-power case for dollar assets.

The gold implication

My base case is a dovish hike and a bullish gold response

The international comparison reinforces my skepticism about waiting. The ECB raised all three key rates by 25 basis points on September 10. Euro-area August headline inflation was 3.3%, slightly below the US CPI reading of 3.4%, although the indices use different baskets. This does not rank every central bank's overall stance; it shows that another major central bank has already responded to the common inflation shock.⁷⁹

The political element is central to my forecast. I expect this administration's preference for lower borrowing costs to make the Fed more willing to acknowledge inflation than to sustain the restraint needed to contain it. A hike can be the concession that preserves the appearance of resolve while dovish communication limits the tightening that follows.

That is why my gold view is bullish: a dovish hike, persistent inflation pressure, weaker expected real returns and a greater need to protect purchasing power.

Sources & method

Sources and context

Written on 15 September 2026, before the September 16 FOMC decision. The dovish hike, political interpretation and expected gold response are the author's forecasts. References 1–9 identify the policy decisions, public statements and economic releases used. PCE, CPI, PPI and euro-area HICP measure different baskets and stages of pricing; all comparisons retain their stated periods. This note updates the gold assessment in the 30 August research note.