The recent surge in gold prices is the result of multiple factors, including expectations around the Federal Reserve’s monetary policy, safe-haven sentiment, and structural gold purchases.
$3,500! International gold prices have hit another record high! What’s going on?
On September 2, gold prices broke records again, surpassing the $3,500 (per ounce) mark, with silver also jumping, returning to $40 (per ounce) for the first time since 2011. This year, gold has experienced a rollercoaster ride—though it has had its ups and downs, its overall cumulative gain still exceeds 30%, while silver has surged more than 40%. Over the past three years, both precious metals have been extremely popular, each more than doubling in value.
In fact, since late April, market concerns over the so-called “reciprocal tariffs” policy of the United States and geopolitical uncertainties have temporarily eased, leading to a slight pullback in gold prices and four months of high-level consolidation. So why has the gold market, after such a long period of consolidation, suddenly “exploded” again?
First, the most direct driving force is market expectations of a Federal Reserve rate cut. Consider these signals: August’s U.S. non-farm payroll data fell short of expectations, the unemployment rate also rose, and Federal Reserve Chair Powell’s “dovish” stance at the global central bankers’ conference further fueled expectations for a rate cut. The market now predicts an over 85% chance of a 25-basis-point rate cut in September! Looking at historical averages, within 60 days after the Fed begins cutting rates, gold prices have risen by an average of 6%! In some cycles, the increase has even reached 14%. This expectation alone provides strong support for gold prices.
Of course, there are many other factors at play, such as a weaker U.S. dollar, record-high U.S. debt levels, geopolitical uncertainties, and continued gold purchases by central banks worldwide, all contributing to this round of gold price increases.
However, in the short term, gold prices may not necessarily continue to soar. If upcoming U.S. economic data improves—for example, if non-farm payrolls or inflation rebound beyond expectations—it could temporarily slow the Fed’s rate-cutting pace, potentially leading to a pullback in gold prices. But some analysts believe that, given support from buying by major central banks, any pullback is expected to be limited, likely within 10%.
So the question is: can this bull market in gold continue?
Many institutions remain optimistic. For instance, one major investment bank has set a gold price target of $3,800 for the fourth quarter of this year and believes there is potential for even higher gains.
Other analyses suggest that against the backdrop of a potential global economic slowdown or even stagflation risks, gold’s role as the ultimate safe-haven asset is becoming increasingly prominent! Especially now, with heightened volatility in global bond markets and challenges to the U.S. dollar’s credibility, gold—due to its independence from any country’s credit and limited supply—has become an ideal diversification tool in asset allocation.
Looking further ahead: rising U.S. fiscal deficits and trade policy uncertainties persist, and more investors are beginning to question the reliability of dollar-denominated assets. These factors may continue to drive investors toward gold. If gold was previously seen more as an inflation hedge, its safe-haven and security attributes are now becoming increasingly important!
In summary, this round of gold price increases is the result of multiple factors, including monetary policy expectations, safe-haven sentiment, and structural gold purchases. Although short-term fluctuations in gold prices are possible, in the medium to long term, gold remains in a favorable position. It’s no wonder many analysts believe that for those seeking safer financial assets beyond the U.S. dollar, gold is an ideal choice.
What do you think about this gold market trend?
