Rate cut expectations reshape asset landscape: Gold breaks through $3700 mark strongly, Goldman Sachs aggressively targets $5000

The gold price saw a historic breakthrough on Tuesday as expectations of a rate cut by the Federal Reserve continued to rise. Spot gold surged to $3702.84 per ounce in early trading, breaking through the $3700 mark for the first time and hitting a new all-time high. Although it later fell to around $3685 during the session, it remained above the record high set the previous day. At the same time, U.S. gold futures also surged to $3739.90 before experiencing a technical pullback. The core logic behind this sharp rise is the market's strong expectation that the Federal Reserve will start cutting rates this week. The U.S. dollar index fell to its lowest level since July, combined with weak labor market data and the absence of unexpected inflation pressures. Traders are not only betting on a rate cut in September, but also expect further easing of monetary policy before the end of the year. The low interest rate environment significantly benefits gold as a safe-haven asset with no interest income. OANDA analyst Zain Vawda emphasized that the recent rise in gold prices has been largely driven by market expectations of a significant rate cut by the Federal Reserve, despite ongoing uncertainties in the global economy and geopolitical risks that continue to push up demand for safe-haven assets. Gold prices have surged by 41% so far this year, significantly outperforming major assets such as the S&P 500 index, and surpassing the inflation-adjusted historical peak from 1980. Specific data shows that since hitting a 52-week low of $2564.30 on September 17, 2024, gold prices have risen by as much as 43.86%; compared to the settlement low of $2638.40 on January 6, 2025, prices have risen by 39.82%; the increase so far this month is 6.20%, with an increase of $1059.70 per ounce since the beginning of the year, representing a 40.31% rise. Analysis points out that this round of rise is supported by multiple factors: central banks continuing to buy gold, influx of safe-haven funds, and a global de-dollarization strategy. Bank of America's research specifically notes that the current combination of a 2.9% inflation rate in the U.S. and Feds accommodative policy is historically favorablesince 2001, gold prices have never fallen during periods of inflation above 2% and Fed maintaining a dovish stance. Institutional bullish sentiment is high, with UBS raising its year-end gold price target to $3800, while Goldman Sachs offers a more aggressive prediction: if the private sector shifts 1% of U.S. Treasury holdings to gold, the price of gold could approach $5,000. The market is reevaluating gold's traditional role as a hedge against inflation and currency depreciation risk, as investors seek shelter in assets amid stagflation and devaluation risks.