Gold hits a new record high
Gold has been on an upward trajectory, reaching new record highs in September, with a 7% gain over just two weeks. The rally is driven by several factors, with growing expectations of interest rate cuts by the Federal Reserve (Fed) being the primary reason.
The impact of trade tariffs and mounting uncertainty regarding the Fed's independence have also bolstered gold's role as a hedge against systemic risks. Additionally, a weaker dollar, which is historically inversely correlated with gold, has further amplified its upward momentum. Furthermore, investor interest in exchange-traded funds (ETFs) and demand from central banks also pushed prices higher. Adding fuel to the rally is reduced trading activity at the end of the summer, which has further exaggerated movements.
Caution amid optimism
Caution is still warranted, as the market has yet to determine whether the rise represents a breakthrough or merely a short-term spike. With key US economic data releases on the horizon, the sustainability of this rally could face near-term tests.
The macroeconomic environment remains uncertain. Global trade tensions, geopolitical risks and shifting monetary policy all add layers of complexity to the outlook for gold. However, despite potential corrections, the broader support for gold suggests continued price strength. Even if prices see a correction, dips are likely to attract buyers, with key support levels expected at USD 3,450 and USD 3,400.
Seasonal tailwinds
Historical trends are other factors to consider. Gold has traditionally shown strong performance in the fourth quarter, driven by physical demand. This can partly be attributed to the Indian festival season and the Chinese Lunar New Year, during which gold is gifted as jewellery. This points to further gains at the end of the year. Although September’s reputation as a weaker month for gold, strong sentiment and renewed momentum could echo last year’s gains. Additionally, government institutions, particularly central banks, are expected to remain net buyers, which will further support demand.
Conclusion
Gold's bull market is expected to continue until 2026 and then stabilise at higher levels. Gold’s lasting appeal lies in its ability to strengthen portfolios due to its role as a hedge against uncertainty, fiscal vulnerabilities and geopolitical risks. While near-term volatility cannot be ruled out, the macroeconomic backdrop, seasonal demand trends, and strong investor interest suggest continued price strength.
We see upside potential for gold, with our optimistic scenario pointing to a possible rise towards USD 3,700.