Market Expectations for Rate Cuts Push Gold to New Highs

Gold surged to a record high on Monday (22nd), as investors anticipate the Federal Reserve (Fed) embarking on a dovish rate-cutting path. Market focus this week will be on speeches from multiple Fed officials and key inflation data. Fed Governor Milan stated that the Fed should cut rates more aggressively to mitigate risks to the economic outlook. Last Wednesday, the Fed delivered its first rate cut since December, lowering the benchmark rate by 25 basis points, with markets expecting further easing ahead.

Safe-haven demand continues to flow amid ongoing geopolitical uncertainty, including the Russia-Ukraine war. The Fed‘s latest cut, along with the possibility of more by year-end, has provided additional support for gold. Investors are closely monitoring Fed Chair Jerome Powell’s remarks scheduled for Tuesday afternoon (U.S. Eastern Time) for signals on the future policy path.

The drivers of gold demand are shifting. While central bank purchases and Asian demand have been the dominant factors in recent years, Western investors are now stepping in, evident from rising holdings in gold ETFs. This trend is largely driven by expectations of continued rate cuts.

Global central banks purchased over 1,000 tons of gold annually for the past three years, and in the first half of this year alone, added more than 400 tons. Despite drawbacks such as high storage and transportation costs, gold remains attractive as one of the best alternatives in the ongoing global “de-dollarization” process. Concerns over geopolitics, sanctions risk, and the dollar‘s reserve status have spurred record central bank buying. In the first half of this year, gold overtook the euro to become the world’s second-largest reserve asset, second only to the U.S. dollar. In fact, foreign central banks now hold more gold than U.S. Treasuries.

Figure 1. U.S. Benchmark Interest Rate

Gold breaking above $3,700 an ounce reflects a confluence of factors: rate-cut expectations, dollar weakness, rising economic and geopolitical risks, and technical momentum. If the Fed continues its easing cycle or global uncertainty escalates, gold may extend its uptrend. However, a sharp rebound in the dollar or a hawkish policy shift could trigger near-term pullbacks.

Gold Technical Analysis

Gold has broken through $3,700 and is consolidating near the $3,750 level. The combination of rate-cut expectations and geopolitical risks continues to push prices higher, with markets eyeing a potential test of $3,800.

For short-term trading, long positions can be considered near $3,725–$3,700, with a stop-loss of $10–$20.

• Resistance: $3,750/oz

• Support: $3,700/oz