• The price of gold climbed above $3,500 an ounce, after several months of stagnation: since April, it has been locked in a zone between $3,100 and $3,500 an ounce.
• This rally is being driven by the weakening dollar and expectations of a Federal Reserve rate cut as early as September.
• A deterioration in economic conditions could lead to a sustained rise in gold.

But is the rise in gold prices seen at the end of August sustainable? Is it simply a phenomenon of anticipation, or is it set to continue?

ARTICLE SUMMARY :

• 1) A fall in rates (almost) certain!
• 2) Gold's rise: a lasting phenomenon?
• 3) What potential for the end of 2025?
• 4 ) The advantages of physical gold today (more than ever)

1) A rate cut (almost) certain!

Without a doubt, the traditional central bank meeting in Jackson Hole this summer set the tone for the autumn.

After keeping its key rate unchanged at 4.33% since January, the US Federal Reserve now seems ready to embark on a phase of monetary easing. The market is now anticipating one to two rate cuts between now and December.

Jerome Powell's remarks at the symposium on August 22 largely fueled the momentum observed on financial markets. In particular, he stated that "the balance of risks may warrant an adjustment" in monetary policy, suggesting a strong likelihood of a rate cut.

Indeed, this prospect is justified in particular by signs of a slowdown in the US job market. In July, only 73,000 jobs were created, well below expectations, confirming the slowdown observed since late spring.

At the same time, the unemployment rate has been climbing back up to 4.2% for several months, fuelling concerns that this trend could worsen.

2) Gold's rise: a lasting phenomenon?

Historically, a fall in the real interest rate, often induced by an easing of the central bank's key interest rate, tends to support the rise in the gold price. Indeed, when real interest rates fall, gold mechanically becomes more attractive.

Another way of looking at this phenomenon is to recall that a lower return on capital in the United States exerts downward pressure on the dollar, which, by mirror effect, boosts the price of gold. Expressed in euros, the price of gold is rising more moderately.

While inflation remains high, with an annual increase of +2.7% in July and underlying inflation still higher, gold is benefiting above all from expectations of a deterioration in economic conditions over the coming months.

Confirmation of this scenario could trigger the upward movement expected by many investors.

3) What potential for the end of the year?

But the effect of a rate cut on the price of gold depends above all on the expectations of the financial markets. The most recent anticipation of monetary easing by the Federal Reserve led to a sustained rise of around $500 per ounce, both before and after the actual rate cut in August 2024.

If a similar scenario were to occur again, gold could evolve in a range between $3,900 and $4,000 an ounce. However, the yellow metal is still showing signs of technical resistance and does not appear to be fully free of its current congestion zone.

4) The advantages of physical gold today (more than ever)

For investors, gold offers many advantages in 2025:

- In the face of heightened international uncertainty, which could become even more acute. More than ever, gold appears to be the only credible alternative to the dollar, whose value has been weakened by its depreciation and relative isolation on the international scene, including in central bank reserves.

- Faced with the risk of an economic slowdown, while equity markets remain exposed to fluctuations in activity, gold retains its defensive and wealth-protecting role. While gold has risen, the price of more speculative assets such as bitcoin has fallen.

Beyond these cyclical aspects, physical gold offers three major advantages that are being reinforced this year:

- SECURITY AS A NEW FORM OF SAVINGS: gold is not dependent on any counterparty. Against a backdrop of political pressure on the Fed and geopolitical instability, this asset is particularly important. For example, Donald Trump's threats to certain central bankers are raising doubts about the dollar's integrity.

- MEDIUM- AND LONG-TERM PROFITABILITY: the steady rise in gold prices (almost +4% in August) illustrates its potential, particularly in periods of falling interest rates, as was already the case in the summer of 2024.

- LIQUIDITY: gold can be easily resold or converted, even for inexperienced investors.

Conclusion

The breaching of the $3,500 per ounce threshold marks a turning point for gold after several months of hesitation.

Buoyed by a weakening dollar and the highly likely prospect of a Federal Reserve rate cut, gold is an exception to the trend for stock market indices and crypto-currencies.

The persistent weakness of the US job market is fuelling investors' belief that the Fed will have no choice but to ease policy.

Historically, falling real interest rates have been a powerful catalyst for gold. Should the 2024 scenario be repeated, the price could move into the $3,900-$4,000 per ounce range. But the end of August does not allow us to judge this prospect with sufficient clarity.

In this climate of uncertainty, physical gold stands out for its security, medium- and long-term profitability and liquidity. Gold is shining brighter than ever!