Gold Prices Reach Record Highs Amid Fed Easing Expectations

Gold Soars as Fed Rate Cut Expectations Grow

Gold prices have reached new record highs as market expectations increase that the US Federal Reserve will begin its interest rate cutting cycle this week. Spot gold on Tuesday surpassed the $3,700 mark for the first time ever. A weaker dollar index, hitting its lowest level in over seven weeks, also supported the rise in gold prices.

Traders and industry experts suggest that as gold continues to break historical records, there are growing indications that the rally will extend through the end of this year. However, a healthy correction is likely before the $4,000 per ounce milestone is breached in 2026.

Driving Factors Behind Gold's Rise

Anticipation of monetary easing by the Federal Reserve, ongoing geopolitical tensions, concerns over the Fed's independence, and significant purchases by central banks are all strong driving forces pushing investors into the precious metals market.

"The long-term gold bull market pattern remains unchanged, especially the demand from central banks and ETFs, which is still growing at a faster pace," said Renisha Chainani, head of research at Augmont Refinery in Mumbai, on the sidelines of the India Gold Conference in New Delhi.

"But gold is currently in overbought territory, and we may see a 5%-6% correction in the short term, followed by a consolidation phase, after which it will rise again, and is expected to exceed $4,200 in 2026 to set a new historical high," she added.

Gold prices have risen by approximately 40% so far this year, with the increase in 2024 alone reaching 27%.

Positive Outlook for Gold Through 2026

Almost all industry participants at the conference expect the gold bull market to continue through 2026, thanks to US interest rate cuts, strong investment demand, and geopolitical risks.

"Analysts have predicted that gold will reach $4,000 in 2026, but it is difficult to pinpoint the exact timing. Compared to all the forecasts we have seen, the speed at which gold is reaching its target is much faster than expected," said Nicholas Frappell, global head of institutional markets at ABC Refinery.

Markets widely anticipate that the Federal Reserve will announce interest rate cuts at the end of the monetary policy meeting on September 17. US President Donald Trump had previously pressured the Federal Reserve to cut interest rates, and repeatedly criticized Fed Chairman Powell for being too slow to act.

Gold has always been a popular choice for hedging against geopolitical and economic risks, and it also benefits from a low interest rate environment.

"Gold prices are in uncharted territory, and have not previously lingered for long in the $3,400 and $3,500 range," said Philip Newman, managing director at consultancy Metals Focus, adding that his firm expects gold prices to rise to around $3,800 by the end of the year.

"After this rally, there may be a correction in the future, but we also believe that this is a buying opportunity for investors waiting to enter. Gold is expected to exceed $4,000 in 2026," he said.

Silver Also Shines

Regarding silver, which has both investment and industrial properties (used in electronics and solar panel manufacturing), it has also performed well, driven by the strength of gold prices and concerns about supply shortages and strong physical demand.

On Tuesday, spot silver approached the $43 level, its highest level in 14 years.

"In addition to traditional industrial uses, increased investor interest is also providing strong support for silver prices," said Chirag Thakkar, CEO of Amrapali Group Gujarat, a major silver importer in India.