Following the Fed's 50 basis point rate cut this week to start a loose cycle, spot gold once again broke through $2,600 per ounce on Friday, approaching $2,610 per ounce at one point, continuously hitting new historical highs. As of this year, it has risen by over 25%. Spot silver also rose over 1% intraday.

Will Rhind, founder of GraniteShares Advisors, managing a gold ETF, stated that the start of the Fed's rate cut cycle means interest rates are decreasing, and the dollar will begin to weaken. 'This is good for gold. The next catalyst for gold's rise will be if people feel the economy is entering a recession, fear emerges, and people need to start buying gold as a hedge,' he said.

The Fed expects the benchmark interest rate to fall by another 50 basis points by the end of this year, another 100 basis points next year, and 50 basis points in 2026.

Alex Ebkarian, Chief Operating Officer of Allegiance Gold, pointed out, 'The market is considering greater and more rate cuts as the United States faces both fiscal and trade deficits, which will further weaken the overall value of the dollar. When you combine geopolitical risks with the current deficit situation, along with a low interest rate environment and a weak dollar, all these factors combined are the reasons for the rebound in gold prices.'

In a report, UBS Group stated, 'In our view, this rally may go further. Our target is for gold to reach $2,700 per ounce by mid-2025. In addition to recent risk-driven factors, we expect demand for gold ETFs to accelerate over the next few months.'

At the same time, UBS Group added, 'We maintain our previous view that silver will benefit from the rising gold price environment.'

Although the demand from emerging markets, especially from various central banks, Asian consumers, and investors, is the main driving force behind the rise in gold at the beginning of 2024, the focus in recent months has completely shifted to the Federal Reserve and the economic outlook in the USA. In a low-interest rate environment, interest-free gold usually benefits, and concerns about economic recession often prompt investors to see gold as a safe haven.

Bloomberg's analysis of the 6 Federal Reserve easing cycles since 1989 shows that as rate cuts begin, gold, US treasuries, and the s&p 500 index usually all rise.

The Federal Reserve's rate cuts have ended the turbulent period in the gold market. Some analysts point out that this will bring it back to a more traditional trading pattern, especially the long-standing negative correlation between gold and real yields. In recent years, this relationship has been broken, with gold prices at historic highs in a rising interest rate environment, supported mainly by massive central bank purchases and surging demand from Asian investors and consumers.

However, in recent months, there have been signs that as more people bet on the Fed's shift, Western investors are pouring back into the gold market. Over the past 12 weeks, gold ETF holdings have risen for 10 weeks, while net long positions in gold futures on the New York Commodity Exchange (COMEX) have hovered near the highest level in four years.

Goldman Sachs analysts also mentioned this in a recent list of reasons for the rise in gold prices. The bank stated that when the Fed cuts rates, capital usually flows into gold ETFs. The analysts wrote: "We expect the Fed's easing cycle to gradually increase the holdings of gold ETFs, thereby boosting gold prices."

Goldman Sachs predicts that by early 2025, with Western capital flowing into gold ETFs, central banks worldwide continuing to stockpile this precious metal, and investors seeking to hedge geopolitical and economic recession risks, gold will reach $2,700.