Gold Shines at Record Highs Near $2,600 as Global Interest Rate Cuts Drive Prices Up

The price of an ounce of gold is nearly 2,600 dollars, and the price may soon be even higher. The Federal Reserve in the United States is likely to cut interest rates in the coming days, and indications are increasing that it will be a radical cut.

Last week, the seventh time this year, the price of gold broke a record, surpassing 2,550 USD/oz. The market reacted this way to the reduction of interest rates by the European Central Bank. Gold also marked another ATH in Polish zloty, approaching the barrier of 9,940 PLN per ounce. The beginning of the new week also saw increases – on Monday, 16th September, the SPOT price for an ounce of royal metal rose above 2,580 dollars.

Gold on an upward course

Forecasts for the precious metal are even more optimistic. Major banks worldwide like Goldman Sachs, UBS or ING largely agree and predict that gold will reach 2,700 dollars per ounce next year. According to Goldman Sachs, this will happen at the beginning of 2025, while ING analysts estimate that this will be the average price per ounce over the entire year.

David Oxley from Capital Economics, a prominent independent supplier of economic analysis, also holds this view. He increased his gold price forecast for 2025 to 2,750 USD per ounce, and this was b before last week’s record was set. However, this does not mean that the metal will keep growing unceasingly, deeper correction is also possible, but a bounce back would likely follow. So the upward trend is maintained.

Interest rate cuts are the main reason for the upward trend in gold prices. Soon, on the 18th of September, the US Federal Reserve is expected to make a cut. Everyone wonders how deep it will be, because after last week’s decision of the European Central Bank and new inflation data from the USA, according to FedWatch Tool, the probability of a radical cut by 50 basis points is now 59%.

Central banks are making cuts and buying gold

Cuts are also planned by other central banks from around the world. The Swiss National Bank, which cut interest rates in June, is in the phase of cuts. The Bank of England is currently in a similar process. In other words, European banks are weakening their currency, believing the situation requires this and they can afford it given controlled inflation.

The National Bank of Poland, on the other hand, is holding off with such a decision as inflation is rising in our country, which is connected to the abolition of many shields introduced a few years ago. And the winter season is ahead of us, which means high energy costs. According to analysts, the peak of inflation will be at the beginning of next year. And then, prices should start falling and discussions about cuts might begin. But currently, there is no talk of it.

Central banks will also continue to increase their gold reserves. The Russian Ministry of Finance, for example, has announced such an intention. The country’s central bank, which so far this year has bought only 4 tons of gold, plans to make significant purchases in September, thus diversifying its foreign exchange reserves and investing in gold the surplus from oil sales.

Michał Tekliński, a gold market expert at Goldsaver.pl, Goldenmark Group