Highlights:

– Gold breaks above $3,500 per ounce for the first time, fueled by easing expectations.
– Investors price in an accelerated cycle of U.S. Federal Reserve rate cuts.
– Rising demand from central banks and ETFs adds to market momentum.

Gold extended its historic rally this week, breaking through the symbolic $3,500 per ounce level for the first time. The move comes as mounting evidence of slowing U.S. economic growth and softening inflation has reinforced expectations that the Federal Reserve will soon pivot toward aggressive monetary easing.

Rate-Cut Bets Drive Momentum

Investor positioning in futures markets suggests growing conviction that the Fed could begin cutting rates as early as September, with some analysts now anticipating as much as 75 basis points of easing by year-end. Lower rates typically weaken the dollar and reduce bond yields, improving the relative attractiveness of non-yielding assets like gold.

The rally also reflects a global shift in risk appetite. With U.S. Treasury yields retreating from multi-year highs, capital has rotated into defensive assets. Analysts note that gold’s sharp appreciation has significantly outpaced moves in other safe havens such as the Japanese yen or Swiss franc.

Institutional and Central Bank Support

Beyond retail and speculative flows, sustained demand from central banks continues to underpin the market. The People’s Bank of China and other emerging-market institutions have been net buyers of gold, seeking to diversify reserves away from the U.S. dollar. According to the World Gold Council, central banks purchased nearly 1,000 metric tons of gold in 2024, one of the strongest years on record.

Exchange-traded funds (ETFs) have also seen renewed inflows after months of outflows earlier in the year. The combined effect of institutional and official-sector demand has reinforced gold’s breakout momentum and widened its investor base.

Broader Market Implications

Gold’s climb above $3,500 underscores broader concerns about the durability of the global economic expansion. Equity markets remain near record highs, but the simultaneous surge in gold highlights hedging behavior among investors wary of geopolitical tensions, persistent inflation risks, and potential volatility around the U.S. presidential election.

In Israel, the shekel has shown relative stability against the U.S. dollar, but local investors with exposure to global commodities are closely monitoring gold’s rally as part of broader portfolio diversification strategies.

Gold’s record-breaking performance adds a new dimension to the investment landscape as the Fed’s policy trajectory comes into sharper focus. If inflation continues to cool and the labor market softens further, the case for rate cuts will strengthen, potentially extending bullion’s rally. However, a surprise rebound in inflation or a more cautious Fed stance could quickly temper gains.