Gold surged to an all-time high on Tuesday as markets responded to a weakening U.S. dollar, intensifying expectations of a Federal Reserve rate cut, and heightened investor concerns over the central bank’s independence.
The price of gold climbed 0.9% to $3,508.70 per troy ounce in early Asian trading before pulling back slightly to around $3,497.
Expectations of a Federal Reserve rate cut in September remain elevated, with the CME FedWatch tool indicating a roughly 90% probability of a 25-basis-point cut. A softer U.S. dollar has made gold more appealing to foreign investors, further fueling the rally.
Investor jitters have been compounded by growing alarms over the Federal Reserve’s independence. President Trump’s repeated criticism of Fed Chair Jerome Powell, as well as threats to dismiss Governor Lisa Cook, have cast doubt on the central bank’s autonomy.
Strong inflows into gold exchange-traded funds have further helped to support prices. Goldman Sachs highlighted the importance of these ETF flows and projected that spot gold could reach $4,000 per ounce by mid-2026.
Central bank demand has also been climbing, with the price of the metal having nearly doubled since 2023. In 2024, gold overtook the euro to become the second-largest reserve asset after the U.S. dollar, constituting 20% of global official reserves. Major buyers included India, China, Turkey, and Poland..
Going into the September 17 Fed meeting, investors will be watching closely for new signals on rate policy and central bank autonomy. With upward momentum firmly in place, levels above $3,500 per ounce look likely to hold, and a move toward $4,000 is well within reach if current conditions persist.
By Charles Kennedy for Oilprice.com
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