Gold prices surged to a new record on Monday, with investors positioning for this week’s Federal Reserve meeting where markets widely expect the first rate cut of the cycle.
Spot gold hit an all-time high of $3,682.51 per ounce, surpassing last week’s peak by nearly $9. US gold futures climbed 1% to $3,724.90. The rally extends bullion’s year-to-date gains to about 40%, underpinned by geopolitical uncertainty and strong central bank demand.
After consolidating above $3,500 since April, analysts say gold looks primed for a breakout. The latest push higher comes as traders price in a quarter-point rate cut following signs of labour market weakness. “Expectations of a 25-basis-point rate cut are largely baked in at this point,” said Peter Grant, senior metals strategist at Zaner Metals. Those expectations have driven Treasury yields to multi-month lows and weighed on the US dollar, boosting gold’s appeal as a safe-haven asset.
Markets are also betting on at least one more rate cut before year-end. Grant sees $3,700 as the next upside target, though he noted the Fed’s messaging this week will be pivotal.
The central bank faces unusual scrutiny as policymakers gather, with political pressure from the White House and questions over Fed independence adding to investor unease. Analysts at Goldman Sachs recently warned that if Fed autonomy weakens, gold could soar towards $5,000 an ounce.
Other major banks, including UBS, have also raised their gold forecasts, pointing out that bullion is already trading at its highest levels in inflation-adjusted terms.
BlackRock’s Russ Koesterich, Managing Director and portfolio manager of the firm’s Global Allocation team, has reiterated a bullish stance on gold. Once positioned mainly as a hedge against currency debasement and falling rates, he now highlights its value as protection against a potential rise in volatility.
“Even above $3,600 an ounce, there is still plenty of value in gold,” Koesterich said. He recommends investors hold 2%–4% of portfolios in gold, leaning towards the higher end in the near term as equity market risks grow.
Despite the S&P 500 rebounding to record highs, Koesterich cautioned that volatility is unusually low, with the VIX index recently dipping below 15. He noted that historically, even a modest volatility spike has translated into gold outperforming equities by 3%–5% on a relative basis.
With geopolitical risks simmering, inflation still running hot, and the Fed’s credibility in the spotlight, analysts agree that gold remains a core hedge for investors as the metal continues its historic run.
