Gold near record highs as investors bet on Fed cuts and safe-haven demand

Unprecedented rally drives gold to record territory

​The price of gold prices has surged to unprecedented levels in recent days, with spot gold climbing to $3,674.00 per ounce earlier this week, marking a gain of nearly 40% so far this year. The rally reflects a powerful combination of monetary policy expectations, a weakening US dollar, persistent inflation pressures, and heightened demand for safe-haven assets.

​This extraordinary performance establishes gold as one of the standout assets of 2025, outperforming most traditional investment categories and demonstrating renewed investor appetite for precious metals.

​The sustained nature of the advance, rather than a brief spike, suggests that fundamental factors are driving the rally rather than purely speculative momentum or technical buying.

​The magnitude of year-to-date gains reflects a significant shift in investor sentiment toward gold as both an inflation hedge and portfolio diversification tool.

Federal Reserve policy expectations drive momentum

​The immediate driver of gold's surge has been mounting speculation that the Federal Reserve (Fed) will soon continue to cut interest rates. Weak US labour market data, including slower job growth and rising unemployment claims, has convinced investors that policymakers will need to ease policy before the end of 2025.

​Lower interest rates reduce the opportunity cost of holding gold, which does not generate yield, thereby making it more attractive compared to bonds and cash instruments.

​At the same time, the US dollar has weakened sharply this year, further boosting the appeal of gold, which is priced in dollars and becomes cheaper for buyers in other currencies when the greenback declines.

​This combination of lower opportunity costs and currency effects creates a particularly supportive environment for gold investment across different investor categories and geographical regions.

​Real interest rates support precious metal appeal

​Another important factor has been the drop in real interest rates. While nominal rates remain relatively high, inflation has stayed stubbornly elevated, eroding the real yield on fixed-income securities.

​This shift has strengthened the case for gold as a store of value, particularly when traditional safe-haven assets like government bonds provide barely positive real returns after accounting for inflation.

​Central banks have also played a decisive role in supporting the market, with many continuing to add to their reserves, tightening supply and reinforcing investor confidence in the metal's long-term role as a reserve asset.

​The institutional support from central bank buying, especially in China, provides a structural demand floor that helps sustain higher price levels even during periods when investment demand might moderate.

​Macroeconomic uncertainty fuels safe-haven demand

​Beyond monetary dynamics, broader macroeconomic and geopolitical uncertainty is feeding into the rally. Persistent worries about government debt burdens and fiscal deficits have amplified concerns about future inflation and the credibility of monetary policy.

​At the same time, geopolitical tensions and global trade frictions have encouraged investors to seek security in traditional safe havens, with gold once again standing out as a hedge against instability.

​The metal's role as a portfolio diversifier becomes particularly valuable during periods when traditional asset correlations increase and conventional hedging strategies prove less effective.

​Fiscal concerns in major economies create additional support for gold as investors question the sustainability of current debt trajectories and their implications for currency stability.

​Institutional flows and analyst targets

​Investor flows into exchange-traded funds are adding another layer of momentum to the market, with gold increasingly seen as under-owned in institutional portfolios.

​Analysts are responding by raising their forecasts: Australia & New Zealand Banking Group (ANZ) recently projected prices could reach US$3,800.00 per ounce by the end of 2025, while UBS has suggested a potential climb toward US$3,900.00 by mid-2026.

​Such revisions underscore the belief that the structural factors driving the rally will not fade quickly, with multiple fundamental drivers supporting sustained higher price levels.

​The institutional recognition of gold's portfolio benefits during uncertain times has contributed to steady inflows that complement central bank buying and retail investor interest.

​Technical analysis on gold

​The gold price has so far come close to a 161.8% Fibonacci extension target at $3,746.85. It is measured from the August 1999 low at $252.10 to the September 2011 peak at $1,921.07 and projected higher from the December 2015 low at $1,046.46.

​Further up lies the psychological marker at $4,000.

​Gold daily candlestick chart 

​In the very short-term the gold price may continue to oscillate around the $3,650.00 level and needs to remain stay above its 11 September high at $3,613.00 to remain bid.

​Failure at this level may lead to a minor pullback towards the 3 September high at $3,579.00 but while the next lower 4 September low at $3,512.00 holds, the short-term uptrend is deemed to remain intact.

​As long as the mid-August low at $3,311.56 isn’t being slipped through, the medium-term uptrend is deemed to remain valid.

Portfolio implications and risk considerations

​For portfolio managers, gold is regaining prominence as a diversification tool at a time when equities look short-term overbought and are vulnerable to slowing growth, currencies face volatility, and bond markets remain under pressure from inflation and fiscal strains.

​Yet risks remain that could challenge the current rally. Any reversal of the dollar's weakness might put pressure on the rally, particularly if US economic data proves more resilient than currently expected.

​These potential headwinds highlight the importance of understanding both the supportive factors and the risks that could affect gold's trajectory.

​Investment approaches for gold exposure

​For investors looking to gain exposure to gold's rally or hedge against monetary and geopolitical risks, several approaches are available.

1. ​Research gold market dynamics, monetary policy implications, and safe-haven investment strategies to understand the precious metal's role in portfolio construction.
2. ​Consider how gold exposure fits within your overall investment strategy and risk management approach during uncertain times.
3. ​Open an account with IG by visiting our website and completing the application process.
4. ​Access gold markets through our platform, including spot gold, gold futures, and precious metals products.
5. ​Implement appropriate position sizing and risk management given gold's potential for both gains and corrections.

​Spread betting and CFD trading provide flexible approaches for gaining exposure to gold price movements while maintaining precise risk control.

​For those seeking longer-term precious metals exposure, investment in gold-backed funds or precious metals companies offers alternative approaches to direct commodity exposure.

​For now, gold's march to record highs is emblematic of a market grappling with deep uncertainty about monetary policy, inflation, and global stability. As investors seek to protect wealth in a shifting environment, the metal's historic role as a store of value is once again at the centre of financial markets.​​