Gold just eclipsed $3500/oz, hitting another record high. Those of us who have been saying that gold’s price triggers remain firmly in place are feeling a bit validated. Gold is up almost 35% year-to-date and more than 86% over the last five years. These are astonishing numbers for a commodity that is often written off as a ‘non-yielding’ asset.
The bottom line is gold demand is expected to remain robust through 2026 and beyond. And gold prices are likely to remain on a firm trajectory higher because of several factors that are not only unlikely to change but could accelerate what has already been a gold super cycle.
Rate Cuts Drive Gold Prices
There is now a more than a 90% chance that the Fed will cut rates at its September 16-17 meeting.[1] Gold loves rate cuts, and prices have jumped accordingly.
“The latest rally has been fueled by expectations that the US central bank will lower interest rates for the first time in nine months, after Fed Chair Jerome Powell cautiously opened the door to a monetary easing.”[2]
The market is actually anticipating a sustained volley of rate cuts starting this year and continuing into 2026. As recently as last month, the Fed dot-plot was signaling two rate cuts for this year alone. And according to independent investment and research company Morningstar, the cuts will continue through 2027:
- Federal-funds rate: We expect federal-funds rate cuts of 0.50 percentage points (across two cuts) in 2025, 0.75 points in 2026, and 0.75 points in 2027. Those 2 percentage points in cumulative cuts will drive the federal-funds rate to a target range of 2.25%-2.50% by the end of 2027.
- 10-year Treasury yield: Likewise, we expect the 10-year Treasury yield to move down to an average of 3.25% in 2028, down from an average 4.20% in 2024.
- Mortgage rate: We expect the 30-year mortgage rate to fall to 5.00% in 2028 from an average of 6.70% in 2024.[3]
Central Banks are Grabbing Gold
For the first time since 1996, central banks now hold more gold than U.S. Treasuries. This is a significant shift in global reserves that is likely being driven by geopolitical tensions and widespread global instability.
With the specter of lower interest rates looming, gold has emerged as a more solid safe haven than U.S. debt securities which are vulnerable to inflation, liability accrual, and liquidity concerns.
“Recent data shows that gold has overtaken U.S. Treasuries as the most demanded asset by central banks. For the first time in at least 30 years, central banks now hold close to $4 trillion in gold reserves, surpassing the $3.8 trillion in Treasuries. This shift has become more evident as investors anticipate that Treasuries may deliver lower returns, tied to expectations of a 0.25% rate cut by the Federal Reserve at its upcoming September 17 meeting.”[4]
According to the World Gold Council’s 2025 Central Bank Survey, the majority of the world’s banks anticipate that gold will make up a steadily increasing share of their reserve portfolios. In addition, 76% believe gold will continue to hold a higher share of their total reserves five years from now.[5]
Central bank demand is one of the main drivers of gold prices since it not only creates added price pressure but influences market sentiment as the world’s leading monetary authorities turn to gold as a reliable safe haven.
A Weak Dollar Boosts Gold
We’ve all heard that the value of the U.S. dollar has fallen to record levels this year, but how weak is the buck? According to Morgan Stanley, the dollar ended the first half of this year with its biggest drop since 1973, falling about 11%. This marks the end of a 15-year bull cycle and starts what could be a depreciation pattern that could see the greenback drop another 10%.[6]
The dollar’s downturn is being attributed to changing trade parameters, soaring national debt, elevated inflation levels, policy uncertainty and concerns about the independence of the Fed.
According to The Atlantic Council, a strong and powerful U.S. dollar has always been ‘a given’ but the greenback is now starting to show the wear and tear of heavy debt loads, pricing fears, and uncertain tariff and trade policies.
“For more than eighty years, the US dollar has been the cornerstone of global finance. It’s been an anchor of global economic stability, a vehicle for American influence, and, frequently, a weapon to achieve foreign policy goals. It has served as the world’s primary reserve currency since World War II and the Bretton Woods Agreement in 1944, when other currencies pegged themselves to the dollar and the dollar pegged itself to gold … Nothing will replace the greenback soon, but its erosion is an increasing topic of conversation among global investors.”[7]
And while it’s unlikely that the dollar’s global dominance will fully unravel, the chatter about devaluation and the worry about de-dollarization continue to support gold as a safe haven and a store of value.
Is $4000/oz Now Inevitable?
According to the Economic Times both Goldman Sachs and UBS are now forecasting gold to reach $3700/oz by year end and early next year respectively.
Their forecasts consider critical market shifts including:
- Increased central bank demand globally
- Persistent U.S. macroeconomic risks
- Continued geopolitical tension
- Gradual diversification away from the dollar in reserve holdings[8]
The potential for gold hit $4000/oz is also on the table as inflation pressures, policy uncertainty, market volatility, attacks on the Fed and a floundering dollar have created unprecedented demand from central banks, commercial institutions, investors and everyday consumers.
So, no – it’s not too late to buy gold because the various factors that have been driving gold demand over the past, few years are neither diminishing nor disappearing.
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[1] https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
[2] https://www.mining.com/gold-price-scores-new-record-on-us-rate-cut-expectations/
[3] https://www.morningstar.com/markets/when-will-fed-start-cutting-interest-rates#how-much-further-will-the-fed-cut-interest-rates
[4] https://www.forex.com/en-us/news-and-analysis/gold-update-xauusd-approaches-historical-highs/
[5] https://www.gold.org/goldhub/research/central-bank-gold-reserves-survey-2025/methodology
[6] https://www.morganstanley.com/insights/articles/us-dollar-declines
[7] https://www.atlanticcouncil.org/content-series/inflection-points/an-independence-day-warning-about-the-us-dollar/
[8] https://economictimes.indiatimes.com/news/international/us/gold-prices-on-the-move-touching-new-record-amid-us-dollar-dip-gold-prediction-3700-knocking/articleshow/123639337.cms?from=mdr
