Gold prices hit fresh highs this week , with spot values extending their record run above the $3,500 mark into the middle of the week. By Wednesday morning, bullion had climbed down from Tuesday's $3,537 highs to trade at $3,534.42 an ounce at 1:17 a.m. ET. Meanwhile, U.S. gold futures for December delivery surged to $3,600 on Wednesday morning. Volatility in financial markets, as well as lingering concerns about sticky inflation , economic growth and geopolitical tensions, have all benefited gold this year . Since the beginning of 2025, spot gold prices have risen by almost 35%. According to Deutsche Bank's Jim Reid, this latest record is directly linked to widespread expectations of rate cuts by central banks. "Gold prices closed at an all-time high [on Monday]," he said in a Tuesday morning note to clients. "This surge is largely driven by anticipation of rate cuts and persistent inflation fears, reinforcing their role as classic inflation hedges and safe havens during turbulent times." Market watchers are increasingly expecting the Federal Reserve's Federal Open Market Committee to cut its key interest rate when it convenes on September 16-17. The central bank's benchmark rate has been held in the 4.25%-4.5% range for the entirety of this year — but rising inflation , pressure from U.S. President Donald Trump and indications from Fed Chair Jerome Powell that easing may be warranted , have fueled expectations of a looming cut. The CME's FedWatch tool shows that money markets are currently pricing in a 89.8% chance of a cut this month, with Wall Street anticipating three cuts before the end of the year . Krishan Gopaul, senior EMEA analyst at the World Gold Council, told CNBC in a call on Tuesday that macroeconomic and geopolitical uncertainty was fueling huge inflows into gold ETFs, while central banks were continuing to shore up their gold reserves — both of which were keeping prices elevated. "And then on top of all that, you have [Trump's] tariffs, which is a continuing source of question, given that there seem to be legal battles now in terms of … whether they're permissible or not, so it's a confluence of a lot of different factors," Gopaul said. He added that growing concerns about interference in the Fed's mandate , arising from Trump's persistent criticism of Powell and firing of Fed officials , was also spurring gold higher. " Question marks around the Fed's independence , how that can impact the dollar , what it might mean for the U.S. economy — I think certainly that could have an impact on how people are viewing U.S. assets," he added. "When there are times of crisis, [investors] often look to U.S. assets. It could be that there are slight question marks over those [now] which would be to potentially the benefit of gold." How high can gold go? Nick Lawson, CEO of London-based merchant bank Ocean Wall, said Tuesday that gold was poised for "a powerful breakout." Central banks now held more gold than U.S. Treasurys for the first time since 1996, he noted, while fresh institutional demand was building in China and India. "[Gold has] converging tailwinds from central banks, pensions, insurers and sovereign wealth funds, setting the stage for the next major leg higher," he told CNBC in an email. The World Gold Council's Gopaul agreed that the current environment was likely to support gold prices at least in the short term. "Given the environment that we're in, and a lot of these issues are more long standing, they're not necessarily something that is going to likely be resolved anytime soon — this is going to provide an element of support for the next couple of months at least," he told CNBC. In a Tuesday morning note to clients, strategists at UBS said gold's prospects looked positive. "Aside from potential support from geopolitical uncertainty, we expect gold to benefit from falling yields, which reduces the opportunity cost of holding the zero-yielding asset. Central banks also look set to remain enthusiastic buyers," they said. "So, for investors with an affinity for gold, we reiterate our recommendation for a mid-single-digit percentage allocation. While our price target for June 2026 is USD 3,700/oz, an increase to USD 4,000/oz in a risk scenario where geopolitical or economic conditions deteriorate cannot be ruled out." Supriya Menon, head of EMEA multi-asset strategy at asset management giant Wellington Management, told CNBC on Tuesday that she also saw more upside ahead for gold. "We remain overweight gold on account of structural tailwinds, such as geopolitical concerns, perceived challenges to Fed independence, and sustained central bank buying," she said. "We do not see all-time highs as a significant impediment to near-term gains. For multi-asset portfolios we view gold as a helpful diversifier for equity and fixed income allocations."
