Gold Prices Poised to Rise Amid Central Bank Buying and Anticipated U.S. Rate Cuts

Gold prices are expected to rise in the coming weeks, supported by steady central bank buying and increased clarity on U.S. interest rate cuts. Forecasts suggest that gold will reach its Q1 2025 average target of $2,475 an ounce. Currently, spot gold trades at $2,372.06 an ounce. Gold's rally stalled this week after reports indicated that the People’s Bank of China halted gold purchases for the second consecutive month in June. This interrupted last week's rally fueled by softer-than-expected U.S. nonfarm payrolls data, which had boosted optimism for lower interest rates.

However, recent data shows that gold was buoyed by purchases from the Reserve Bank of India, the National Bank of Poland, and the Czech National Bank. Continued central bank buying, combined with greater clarity on U.S. interest rate cuts, will likely support gold in the coming months.

“Since the official sector appears to remain interested in using gold to diversify their FX reserves, increased investor uptake when the timing of rate cuts becomes more predictable should push gold to new records,” analysts wrote.

Spot gold hit a record high of $2,450.06 an ounce in May, driven by safe-haven demand amid potential conflict between Iran and Israel. However, prices quickly dropped to as low as $2,280 an ounce before rebounding in late June. Spot prices have risen 15% so far in 2024, supported by growing expectations of U.S. interest rate cuts. The Federal Reserve is widely anticipated to cut rates by 25 basis points in September.