Yardeni: Investors’ deficit fears are justified
Stocks are heading into a subdued session on the final full trading day before the Christmas break, despite a packed economic calendar. The market is also just one day away from the official start of the Santa Rally — defined by the Stock Trader’s Almanac as the last five trading days of the year and the first two of the new one. Equities could use the seasonal lift: December has been underwhelming so far for the S&P 500, which is up only 1.6%.
That sluggish equity performance contrasts sharply with another standout month for precious metals. Gold is up 9% in December, while silver has surged 36%, with fresh record highs looking increasingly likely.
This backdrop sets the stage for today’s call of the day from Yardeni Research, which has just turned even more bullish on gold.
“When the price of an ounce of gold rose above $3,000 at the start of this year, we projected it would reach $4,000 by the end of this year and $5,000 by the end of next year,” Yardeni told clients in a new note.
“This evening, the price rose above $4,500. We are raising our year-end 2026 target to $6,000. We still expect to see $10,000 by the end of the decade.”
That forecast eclipses even some of the most optimistic calls on Wall Street. JPMorgan, for instance, sees gold peaking around $5,055 an ounce by the end of next year.
Yardeni points out that while gold and the S&P 500 often move inversely in the short term, both assets have trended higher over longer periods — a relationship that underpins its long-term bullish view.
“The price of gold is rapidly approaching the S&P 500 stock price index,” the firm said. “If the S&P 500 reaches 10,000 by the end of 2029, as we expect, gold should trade at $10,000 if our trend analysis is correct.”
The Yardeni team first turned bullish on gold in early 2024, when prices broke above $2,000. At the time, they argued that central banks were ramping up gold purchases after the U.S. and EU froze Russia’s international reserves.
More recently, geopolitical risks — including tensions between the U.S. and Venezuela and renewed Ukrainian attacks on Russian ports — have helped push gold higher. Another key driver, Yardeni agrees, is the fear that central banks will resort to money printing to inflate away mounting debt.
While gold has lagged silver by 139% this year, platinum by 133%, and palladium by 95%, Yardeni says the rally across precious metals is unlikely to reflect a rebound in global growth, as gains in industrial metals have been far more modest.
“We suspect that precious metals prices may be signaling rising concerns about an excessively stimulative mix of monetary and fiscal policy in the U.S. next year,” the firm said.
Even if the Federal Reserve pauses rate cuts in early 2026, Yardeni notes that it remains committed to buying roughly $40 billion in Treasury bills per month through April, citing the New York Fed. On top of that, expectations are growing that U.S. households could receive $1,000–$2,000 government refunds in 2026, alongside proposals for $2,000 “tariff dividend” checks.
The bottom line, according to Yardeni: the federal budget deficit could swell sharply in the first few months of next year, potentially pushing bond yields higher and triggering a pullback in equities — a risk investors are right to be worried about.
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