Solomon Global: Gold Rockets Beyond $3,600 on Escalating Geopolitical Tensions and Fed Rate Cut

Gold has smashed through another psychological barrier, leaping past $3,600 an ounce after a weak U.S. jobs report intensified expectations of a Federal Reserve rate cut next week. The price spiked further following Israeli military operations against the Hamas leadership, climbing as high as $3,674.79/oz. Gold has posted 11 positive days in the last two weeks.

“Gold came within touching distance of a fresh record high at $3,700/oz. in early US trade before paring today’s [September 9th] gains. Any bout of profit-taking in the precious metal will likely find renewed buying interest, especially with the Federal Reserve expected to cut interest rates next week.” Nick Cawley, contributing analyst for Solomon Global.

Gold has surged by over 38% year-to-date and is up more than 46% over the past 12 months, reflecting persistent inflationary pressures and mounting global uncertainties. Currency markets are mirroring this risk-averse sentiment, with the Japanese yen and Swiss franc finding a bid against major trading partners. According to Gold Telegraph, the dollar has lost nearly 45% of its purchasing power against gold over the past year.

Central Banks – Gold Buying Continues

ANZ Group believes that the ferocious appetites of central banks for gold will not be abating any time soon; it estimates they will collectively add over 1,000 tons of gold to reserves in 2025, a sentiment echoed by Reuters’ Jamie McGeever, who says gold’s rise in central bank reserves “appears unstoppable.”

Indeed, China’s gold-buying spree continued in August with the political and economic powerhouse adding bullion to its reserves for the tenth consecutive month. Poland, the largest gold buyer year-to-date, looks to be further bolstering its hoard. The governor of Poland’s central bank, Adam Glapinski, recently announced his proposal for gold to make up 30% of the bank’s reserves (from the current level of 20%).

Current regular purchasers Kazakhstan, Turkey, and the Czech Republic all added to their gold holdings in August, with the Turkish central bank reported to have been a net purchaser for 26 consecutive months since June 2023.

As mentioned in Solomon Global’s previous post, Crescat Capital macro strategist Tavi Costa highlighted that for the first time in nearly 30 years, foreign central banks hold a larger share of their reserves in gold versus U.S. Treasuries. This follows from gold overtaking the euro as a global reserve asset three months ago.

This buying frenzy is not just limited to institutional investors. As Graeme Coles-Andrew, writing for The Armchair Trader, puts it, the UK is once again gripped by “gold fever.”

What the Analysts are Saying About Gold

ANZ Group, which today (September 10th) has raised its year-end gold price forecast to $3,800 and expects prices to peak near $4,000 by next June, said in a note that: “Prospects of continued accommodative monetary policy, increasing geopolitical tensions, ongoing macroeconomic challenges, and concerns over the Fed’s independence are expected to strengthen the investment case for gold.” UBS says that $4,000 could be on the table next year in a risk scenario where geopolitical or economic conditions deteriorate, and Goldman Sachs recently said that Trump undermining the Fed could push the precious metal to $5,000.

Solomon Global’s contributing analyst, Nick Cawley, points to the potent mix of macroeconomic tailwinds for gold and muted selling pressure, making $3,750 increasingly plausible by the end of 2025 (the gold spot price has increased by $100/oz just this week).

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