Gold, perceived by many as a hedge against inflation and a neutral commodity, reached a new all-time high on Wednesday. The milestone is part of a rally that has made the precious metal gain over 30% in one year, influenced by several key factors including the current geopolitical uncertainty and the strong demand from central banks.

However, Wednesday’s rise was due to a different reason. Gold prices rose after the Federal Reserve announced deep cuts to interest rates, reducing them by 50 basis points. There was no clear consensus on the size of the cuts, as some economists expected a rate cut of only 25 basis points, which accentuated the effect of the announcement.

As a result, prices of the precious metal futures in the Commodities Exchange (COMEX), one of the largest commodities markets, rose to over $2,625 per ounce during the session. Prices have cooled off to $2,616 since, but analysts expect deeper cuts to produce higher prices later this same year.

Alex Ebkarian, Allegiance Gold’s COO, stated:

The market is factoring in bigger and more rate cuts because we have both fiscal and trade deficits, and that’s going to further weaken the overall value of the dollar.

Gold’s rally might take prices to $3,000 by next year. Gold has already surpassed Citi’s North America’s head of commodities Aakash Doshi’s prediction of $2,600 by the end of this year. Another of his predictions indicates that gold will reach $3,000 by mid-2025.

UBS has also stated that this gold rally still has a long way to go but issued a more conservative prediction. It forecasts spot prices reaching $2,700 by mid-2025, driven by strong demand.

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