Gold hit yet another record high above $3,600 an ounce Tuesday, spurred by expectations of U.S. rate cuts, concerns about Federal Reserve independence, and robust demand from investors and central banks.
Having hit a record high at $3,673.95 a troy ounce, spot gold was trading around $3,637.39 by 1524 GMT for a gain of more than 38% so far this year.
Analysts expect gold to trade in a $3,600-$3,900 range in the near to medium term and see potential for it to test $4,000 next year if economic and geopolitical uncertainties persist.
A Reuters survey published in July showed analysts expected gold prices to average $3,220 this year compared with $3,065 in the April survey and $2,756 an ounce in the January survey.
"Supportive for gold is the bearish dollar outlook underpinned by expectations of Fed cuts, investors distancing from U.S. assets and tariff-related economic uncertainty," said Ricardo Evangelista, senior analyst at ActivTrades.
The dollar has fallen nearly 11% since President Donald Trump returned to the White House in January. Expectations of further U.S. rate cuts will further undermine the U.S. currency, which when it falls makes dollar-denominated gold cheaper for holders of other currencies.
Traders see a 92% chance of a 25-basis-point rate cut in September when the Fed meets, according to the CME Group's FedWatch tool.
Meanwhile, Trump's criticism of Powell and attempts to remove Governor Lisa Cook have heightened concerns over the Fed's independence and sparked further gold purchases.
"The most bullish wildcard is ... potential interference with the U.S. Federal Reserve and concerns about the dollar's status as a safe-haven," said Julius Baer analyst Carsten Menke.
Among other factors fortifying gold's appeal are security concerns emanating from the Middle East and between Russia and Ukraine. Central bank gold purchases such as those by China have also provided impetus to gold prices.
According to the World Gold Council, central banks plan to raise the gold portion of their reserves while reducing dollar reserves over the next five years.
Physically backed gold exchange traded funds have also seen significant inflows. Holdings in the SPDR Gold Trust, the world's largest physical gold ETF, rose to 990.56 tons on September 2 for an over 12% increase so far this year and its highest since August 2022.
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