Highlights:

– Gold steadies close to all-time highs as traders price in faster U.S. rate cuts.
– Softer U.S. economic data reinforces expectations of monetary easing.
– Investors weigh inflation risks and central bank demand against dollar weakness.

Gold prices remained near record levels on Monday as markets increased wagers that the Federal Reserve will deliver interest rate cuts sooner than previously expected. A combination of weaker U.S. economic indicators and dovish policy expectations has underpinned the metal’s rally, while questions around inflation and global growth continue to shape sentiment across commodities and currencies.

Rate Cut Expectations Drive Momentum

The prospect of lower borrowing costs has been the primary catalyst behind gold’s resilience. Futures markets now imply a strong probability of at least two rate cuts by the Fed before year-end, according to CME’s FedWatch tool. Softer U.S. labor market data, coupled with signs of cooling consumer spending, have reinforced investor conviction that monetary tightening has peaked.

Lower rates typically reduce the opportunity cost of holding non-yielding assets such as gold, while also putting downward pressure on the U.S. dollar. The greenback’s recent weakness has further supported bullion, making it more attractive for non-dollar investors. Analysts note that while the Fed has yet to signal an imminent pivot, markets appear increasingly confident that easing is only months away.

Inflation and Central Bank Demand Add Support

Beyond rate expectations, structural demand factors continue to bolster gold. Persistent concerns about inflation — particularly in energy and food markets — keep safe-haven flows alive, even as headline inflation in developed economies moderates.

Central banks, led by China and emerging-market economies, have also sustained a steady pace of gold purchases this year. According to the World Gold Council, official sector demand accounted for more than a quarter of total global demand in the first half of 2025. This diversification away from the dollar provides a strong underlying bid for the metal, insulating it from short-term speculative shifts.

Implications for Investors and Global Markets

Gold’s near-record positioning has broader implications for both financial markets and policy. Rising bullion prices highlight investor unease with the durability of global growth, particularly against the backdrop of sluggish manufacturing data in Europe and slowing trade momentum in Asia. For Israel, higher gold prices are being mirrored by gains in Tel Aviv-listed mining and resource-linked companies, offering a local dimension to the global trend.

At the same time, elevated gold prices complicate inflation management. While the Bank of Israel focuses primarily on domestic consumer price dynamics, higher commodity-linked costs may affect both inflation expectations and portfolio allocation across institutional investors.

Looking ahead, traders will closely monitor U.S. inflation releases, Fed communications, and global macro indicators for confirmation of the easing path. A sharper-than-expected slowdown in the U.S. economy could accelerate bullion’s climb, while any surprise hawkish signals from the Fed might temper enthusiasm. With central banks still buying aggressively and geopolitical risks unresolved, gold is likely to remain a key barometer for global investor sentiment in the months ahead.