Highlights:
Gold surged to fresh all-time highs above $3,600 per ounce, lifted by expectations of Fed rate cuts.
Central bank purchases and ETF inflows have reinforced the rally, pushing year-to-date gains near 40%.
Banks including UBS and Goldman Sachs see the potential for gold to reach $4,000 in coming years.

Gold’s relentless rally shows little sign of abating, with futures climbing to a record north of $3,620 per troy ounce on Wednesday and spot bullion reaching $3,546. The surge comes as traders increasingly price in aggressive rate cuts from the Federal Reserve and question the central bank’s independence amid political pressures. With gold already up 39% this year, the metal has outpaced equities and cryptocurrencies alike, cementing its role as the market’s preferred hedge against economic and geopolitical uncertainty.

Fed Policy, Inflation Expectations, and Investor Psychology

The Federal Reserve’s evolving stance is at the heart of the gold rally. Markets expect a series of cuts beginning later this year, a sharp reversal from the tightening cycle that dominated policy through 2023 and 2024. Lower interest rates diminish the opportunity cost of holding non-yielding assets like gold, creating a structural tailwind for bullion.

At the same time, speculation about political encroachment on Fed independence has amplified gold’s safe-haven appeal. For investors wary of policy distortions, gold functions as both insurance against inflation and protection against currency debasement. This psychological dimension has been particularly visible in ETF flows, with physically backed funds recording their strongest quarterly inflows since 2020.

Central Bank Demand Reinforces Structural Strength

Beyond retail and institutional investors, central banks remain the most powerful buyers in the gold market. JPMorgan analysts note that sovereign purchases, particularly from emerging economies, have created a steady bid that supports elevated prices even during short-term corrections. The push to diversify reserves away from the U.S. dollar has intensified as geopolitical alignments shift, and gold’s role as a neutral reserve asset has gained renewed importance.

This demand backdrop has given analysts confidence to project further upside. UBS recently reiterated its target of $3,700 per ounce by mid-2026, while highlighting the possibility of $4,000 if global risks intensify. Goldman Sachs has echoed this view, citing “structurally strong” central bank buying alongside ETF-driven flows, both supported by Fed easing.

Gold in Comparative Context

Gold’s performance stands out in a year when traditional risk assets have delivered modest returns. The S&P 500 is up just 9% in 2025, while bitcoin has advanced around 20%, far short of bullion’s nearly 40% surge. This divergence underscores a rotation toward assets that provide not only yield or growth but also perceived safety. For asset allocators in Israel, the U.S., and beyond, the metal has become both a tactical hedge and a strategic allocation amid rising cross-border tensions.

What Comes Next

The trajectory of gold will depend heavily on the Fed’s next moves and the durability of central bank buying. A slower pace of rate cuts could temper enthusiasm, while further political challenges to Fed independence may accelerate demand. Investors are also closely watching geopolitical flashpoints—from U.S.-China relations to energy market disruptions—that could trigger another wave of safe-haven flows. For now, the weight of momentum, institutional demand, and shifting policy dynamics suggest that gold’s record-breaking run is far from over.