The price of gold could surge to $2,600 an ounce, influenced by traders’ expectations of upcoming interest rate cuts by the US Federal Reserve.

Analysts predict an upward trajectory for gold prices over the next year, expecting a shift in the US central bank’s monetary policy.

Lower interest rates typically enhance gold’s appeal relative to other asset classes like bonds or equities, which usually provide a yield.

On Sunday, the spot gold price surpassed $2,500 per ounce for the first time, continuing a rally that has seen an increase of $613, or 32 percent, over the past year.

UBS analysts suggest prices might reach $2,600 an ounce by the end of 2024. Traders are keenly awaiting signals from Jerome Powell, the US Federal Reserve Chairman, during his speech at the Jackson Hole meeting of central bankers this Friday, for signs of an imminent rate cut.

Powell’s presentation on the American economy will occur at a two-day symposium, his first public commentary since recent global stock market instability triggered by weak US job data and recession fears.

Market expectations are tilted towards Powell indicating a shift from “inflation targeting” to “growth management,” as noted by Tom Price, a resources analyst at Panmure Liberum. “This suggests he might maintain or slightly reduce rates to foster growth, considering recent pressures in the US labor market.”

Gold prices exceeded $2,000 an ounce only once before, right after the Covid-19 outbreak in 2020.

RBC Capital had already adjusted its price forecasts upward by $405 to $2,480 for this year and by $460 to $2,600 by mid-next year, expecting gold to stay above $2,000 an ounce until at least 2028.

Gold, viewed as a “safe haven” asset, has also been supported by geopolitical tensions involving Russia and Ukraine, and conflicts in the Middle East. “While it’s challenging to argue for higher prices when they are already at record highs,” Price mentioned, “escalating conflicts or heightened tensions between China and Taiwan, or unexpected outcomes of the US presidential election, could drive prices higher.”

The Chinese central bank has significantly increased its gold reserves over the past two years, contributing to the rally. “This is a major factor due to the massive scale of their purchasing program,” Price noted.

In 2023, the People’s Bank of China emerged as the world’s largest single gold buyer, with net purchases of 7.23 million ounces—the most by China in at least 46 years, according to the World Gold Council.