Source: Wall Street See

With the Fed's rate cut approaching, the price of gold is expected to continue hitting new historical highs.

Benefiting from the large-scale purchases by central banks, the spot price of gold has performed strongly this year, already rising by over 20%. As of the time of writing, the spot gold price has risen to $2523 per ounce, approaching historical highs.

Last Friday, Powell's dovish speech at the global central bank annual meeting in Jackson Hole opened the door to a rate cut in September. The yield on 10-year US Treasury bonds fell to its lowest level since December last year, and the US dollar also temporarily fell to a 13-month low. Coupled with escalating geopolitical risks and uncertainty from the US elections driving safe-haven demand, under the combined effect of multiple factors, the gold price is expected to continue rising.

According to the data from the US Commodity Futures Trading Commission (CFTC), hedge funds and speculators have been increasing their bullish bets on the New York Mercantile Exchange. Net long positions in gold have now reached the highest level in over four years.

UBS Group expects that by the fourth quarter of this year, the price of gold will rise to $2600.

Rajeev De Mello, Global Macro Investment Portfolio Manager at GAMA Asset Management SA, commented:

The opportunity cost of holding gold is decreasing.

The rapid decline in real yields and the widespread softening of the US dollar make me very willing to use gold as another currency to short the US dollar.

An important phenomenon to note is that the demand for gold etfs is also recovering. Market data shows that the holdings of one of the major gold etfs, SPDR Gold Shares, have increased continuously for eight weeks, setting the longest record of inflows since mid-2020.

Ryan McIntyre, Managing Partner at precious metals and key mineral asset management company Sprott, stated:

People are actually starting to turn to physical gold etfs. Purchasing through etfs will become a very important part of the gold story.

Citigroup expects a significant increase in the inflow of funds into gold etfs, with the gold price potentially rising to $3,000 by next year:

"Within 6-12 months, loose monetary policies have stimulated demand, and the volatility of recession risk may increase... It is expected that by mid-2025, the gold price could reach $3,000."

UBS Group also stated that after the Fed rate cut lands, a large influx of funds into gold etfs and sustained buying demand is expected.

Editor / jayden