According to Ewa Manthey, a commodity strategist at ING, the rise in gold has just begun, and the highly anticipated Fed rate cut in decades will push the gold price to a new all-time high this month.

In the bank's monthly update, Manthey pointed out that gold is one of the best-performing commodities this year, with a gain of over 21% so far this year.

She pointed out that these gains are mainly driven by market expectations of a Fed rate cut, strong central bank gold purchases, continued Asian buying, and increased geopolitical risks and uncertainty from the US elections.

Manthey believes that the upcoming Fed rate cut cycle will be the next strong and lasting driver of gold prices.

She said, 'At the recent Jackson Hole conference, Fed Chairman Powell explicitly stated that the Fed will cut interest rates on September 18th, and he said, 'The time for policy adjustment has come, and the direction is very clear.''

Manthey added, 'After Powell confirmed that the Fed will soon start cutting interest rates, the gold price rose. Now the gold market is concerned about the speed of the Fed's policy easing.'

She noted that the latest US employment data is mixed, which makes the discussion about the size of the first rate cut more complicated. She said, 'US economists believe that the Fed will choose a 50 basis point cut, but it is a evenly matched battle.'

The demand for gold ETFs has also rebounded throughout the summer. Mansi wrote: "Global gold ETFs have seen inflows for four consecutive months, with positive inflows recorded in all regions, and Western funds leading the way in August."

She said: "Investor positions in gold ETFs usually increase with rising gold prices and vice versa. However, despite the record high spot gold prices, gold ETF holdings have been declining for most of 2024. ETF fund flows didn't turn positive until May."

Mansi also pointed out that total net long positions on COMEX continue to rise, "growing 17% month-on-month by the end of August, reaching the highest month-end level since February 2020."

Despite reaching new historic highs in July, the demand for gold from central banks further strengthened. She wrote: "Net purchases reported by central banks more than doubled in July, reaching 37 tons, a month-on-month increase of 206%, the highest monthly total since January when central bank purchases reached a total of 45 tons."

Mansi pointed out that the Central Bank of Poland was the largest buyer that month, followed by the Central Bank of Uzbekistan and the Reserve Bank of India.

She said: "In 2023, central banks bought 1,037 tons of gold, the second-highest annual purchase volume in history after the record-breaking 1,082 tons in 2022. Looking ahead, given the current economic environment and geopolitical tensions, we expect central bank demand to remain strong."

ING believes that the Federal Reserve's first interest rate cut is sufficient to push gold prices to new record highs. Mansi wrote: "We believe that the U.S. presidential election in November will continue to contribute to the rise of gold until the end of the year. Geopolitics will also continue to be a key factor driving gold prices. Tensions such as the Russia-Ukraine conflict and the Middle East situation indicate that safe-haven demand will continue to support gold prices in the medium term. Central banks are also expected to continue increasing their shareholding in gold, providing support."

ING now expects the average spot gold price in the fourth quarter to reach $2,580, resulting in an average price of $2,388 per ounce for the entire year of 2024. Mansi said: "The upward momentum of gold will continue into next year, with an average price of $2,700 in 2025."