Investing: How Much Higher Can Gold Go?

Following announcements by the U.S. Federal Reserve (Fed), which cut its key interest rates by 50 basis points, the price of gold broke through the $2,600-per-ounce mark, continuing its impressive rise.

This new record, reached on Friday, September 20, at over $2,612, is being driven by the prospect of further cuts in U.S. interest rates, which are boosting demand for the precious metal.
 

The price of gold peaked at $2,612.62 per ounce, just two days after the Fed cut interest rates for the first time since 2020, hinting that further cuts could follow. Gold had already hit a high on September 13, buoyed by expectations of U.S. rate cuts and a weak dollar, and had also seen a significant rise in August.
 

After rising almost steadily over the past year, the price of an ounce of gold was still trading below $1,900 in early October 2023. Over a twelve-month period, the price of gold rose by nearly 35%, buoyed by favorable market conditions.
 

The Fed's decision is just the beginning. As a safe-haven asset, gold is benefiting from the dollar's depreciation and falling bond yields. On Wednesday, the U.S. Federal Reserve began its cycle of monetary easing with an initial rate cut of half a percentage point. Further cuts are planned, with an additional half-point reduction expected by the end of 2024. Jerome Powell emphasized that this was the “beginning of a process” of monetary policy change.
 

This favorable outlook for gold raises the question of how high the precious metal can climb. With the prospect of further rate cuts and an uncertain economic outlook, gold could continue to attract investors seeking safety, pushing its price even higher. The Fed’s upcoming decisions and developments in the global economic outlook will therefore be key factors in determining the future of the gold price.