Gold Is Stubborn at All-Time Highs

Gold prices are climbing by 0.7% this week to $2,518 per troy ounce, nearing the all-time high of $2,531 set on August 20. The current price range of $2,490–2,510 per ounce is a critical resistance zone, but increased buying activity, reflected by inflows into the SPDR Gold Trust (GLD), suggests that further upside is possible. GLD has seen net inflows of $138.6 million this week, extending a streak of 10 consecutive positive weeks and adding to the $2.8 billion total inflows during this period.

The last time a similar inflow pattern occurred was in early 2022, before Russia’s invasion of Ukraine, which led to a significant rally in gold prices. Today, large investors may be positioning themselves for potential geopolitical tensions or, more likely, for monetary easing by the Federal Reserve. Historically, gold prices have rallied during interest rate cut cycles, as seen in 2001, 2007, and 2019. In those instances, gold rose 7.0%, 41.0%, and 36.0%, respectively, over the following 12 months, with no major retracements.

The upcoming Federal Reserve interest rate cuts, likely to begin next week with a 0.25 percentage point reduction, could further fuel a long-term gold rally. Investors appear to be betting on sustained upside, with a target of $3,200 per ounce or higher by 2025.

Technically, gold may face some volatility through mid-October, with a potential pullback to the support level of $2,390–2,410 per ounce. However, many expect investors to prevent a deep correction, potentially driving prices towards the primary target range of $2,700–2,800 per ounce, and even to the extreme targets of $3,200–3,300 per ounce.

The key risk to this outlook would be a resurgence in inflation or a spike in oil prices, though the latest U.S. data points to a steady inflation decline, with consumer prices easing to 2.5% YoY in August from 2.9%. This trajectory supports expectations for monetary easing and a continued gold price rally.