What's behind gold's record-breaking rise, and how high could it go?
The price of gold soared to a new record high of US$3,565 per ounce on Wednesday, driven by a weak U.S. dollar and growing expectations of an interest rate cut by the Federal Reserve later this month. This surge follows a 40% increase in the price of gold since September 2024, with investors flocking to the precious metal as a safe haven amid global uncertainty.
The Federal Reserve’s decision to potentially cut interest rates by 25 basis points at its upcoming meeting on Sept. 17 has been a major factor in driving up the price of gold. President Donald Trump’s criticisms of Fed chair Jerome Powell and concerns over the central bank’s independence have only added to market jitters, pushing investors towards gold as a hedge against economic instability.
Central banks have also been significant buyers of gold, with purchases exceeding 1,000 tonnes for the third consecutive year in 2024. As geopolitical risks, inflationary pressures, and trade uncertainties continue to weigh on the global economy, central banks are diversifying their reserve assets with gold.
Analysts predict that gold prices could continue to rise in the coming months, with J.P. Morgan Research forecasting an average price of US$3,675 per ounce by the end of 2025 and a potential increase to US$4,000 per ounce by the second quarter of next year. Desjardins also expects gold to reach around US$3,400 per ounce by the end of this year, citing ongoing economic and geopolitical uncertainty.
Looking ahead, there is a bullish case for gold as the Fed signals further rate cuts and central banks continue to shift away from the U.S. dollar. With these factors in play, analysts believe that gold could potentially reach $4,000 per ounce in the near future.
In conclusion, the price of gold has hit a new record high, driven by a combination of factors including a weak dollar, expectations of an interest rate cut, and global uncertainty. As investors continue to seek safe havens in volatile times, gold remains a solid option for those looking to protect their assets.
