Here’s Why the Gold Rally Has Just Begun

Gold Prices Set to Rise: A Bright Future Ahead

Despite already substantial increases in gold prices, numerous signals suggest that this growth may only be the beginning.
A shift in Federal Reserve policy, potential weakening of the dollar, and a lower opportunity cost could propel the value of this precious metal even higher.

Moreover, the rising demand for gold-linked ETFs indicates that institutional investors resonate with this outlook for future growth.
The reputation of gold as a safe haven asset during times of uncertainty could truly shine even brighter in the upcoming months and years.

What Has Driven Gold Prices Up in Recent Years?

In 2023 and 2024, gold has experienced remarkable growth fueled by a mix of economic and geopolitical factors.
Global tensions, particularly uncertainties surrounding trade wars, political instability in various regions, and fears of a global recession, have prompted many investors to seek a traditional safe haven in gold.

Additionally, central bank policies, notably those of the Federal Reserve, have significantly boosted gold demand.
Despite the dollar remaining relatively stable, as evidenced by the Dollar Index (DXY), investors have continued to pour money into gold.
This trend persisted amid high-interest rates on U.S.
Treasury securities, with ten-year Treasury yields hovering around 4-5%, well above the past decade’s average.

The increase in gold prices, despite the higher opportunity costs presented by Treasury yields, indicates extremely strong demand for the precious metal.

A New Scenario: The Fed’s Shift

However, we now face a potentially significant shift.
At the recent Jackson Hole conference, Federal Reserve Chairman Jerome Powell announced a monetary policy change.
In his statement, Powell remarked that it is “time for policy to adjust,” signaling a possible interest rate cut expected on September 18.
This announcement, interpreted by many as a turnaround for the Fed, could lead to dollar depreciation, as lowering rates tends to make the U.S.
currency less attractive relative to others.

If such a scenario unfolds, investors buying gold in dollars will find greater convenience.
Gold is predominantly traded in dollars globally; thus, a decline in the value of the American currency could further elevate gold prices, making it more accessible to international buyers.
Additionally, with lower interest rates, the opportunity cost of holding gold will decrease, enhancing the investment appeal of the metal.

How Are Institutions Acting?

Another indicator suggesting that gold’s upward trend may be just beginning is the increase in demand for gold-linked ETFs.
Globally, gold ETFs have seen positive inflows for four consecutive months, with all regions experiencing a boost in demand.

This surge in ETF demand is significant as it reflects growing institutional investor interest, which often uses these instruments to diversify portfolios and protect against economic turbulence.