Gold price surpasses $3,500 to reach a record high, driven by bets on Federal Reserve rate cuts

Gold prices have reached record highs, with the prospect of Federal Reserve rate cuts and concerns over its independence injecting new momentum into the precious metal’s rally in recent years.

In early Asian trading on Tuesday, spot gold rose as much as 0.9% to $3,508.73 per ounce, surpassing the previous high set in April; gains have since narrowed. So far this year, gold prices have risen more than 30%, making it one of the best-performing major commodities.

After Federal Reserve Chair Jerome Powell cautiously opened the door to a rate cut in September, market expectations for a rate cut this month have intensified, fueling the latest surge in gold. The U.S. employment report to be released this Friday may add further signs of labor market weakness, which would support a rate cut.

“Investors are increasing their allocation to gold, especially with a Fed rate cut on the horizon, which is pushing gold prices higher,” said Joni Teves, strategist at UBS Group. “Our base case is that gold prices will continue to hit new highs in the coming quarters. A lower interest rate environment, weak economic data, persistently rising macro uncertainty, and geopolitical risks have strengthened gold’s role as a portfolio diversification tool.”

Over the past three years, both gold and silver prices have more than doubled, as rising risks in geopolitics, the economy, and global trade have driven increased demand for these traditional safe-haven assets. This year, Trump’s escalating attacks on the Fed have become a new factor worrying investors, and concerns over the Fed’s independence could undermine confidence in the U.S.

The last time gold surged to record highs was in April, when Trump announced a preliminary plan to impose comprehensive tariffs on most U.S. trading partners. Afterwards, as Trump put some of the most aggressive trade proposals on hold, safe-haven demand cooled, gold prices quickly retreated, and remained range-bound for several months.

“The space above $3,500 is still unknown, so the market will be closely watching price movements. The last time gold broke through $3,500 was during intraday trading, so we are very interested to see if gold can close above this level, as it could bring some upward momentum,” said Christopher Wong, FX strategist at OCBC Bank. “The risk of new geopolitical tensions and policy uncertainty re-emerging still exists, which will be favorable for gold.”

Meanwhile, silver’s rally has been even stronger, rising more than 40% so far this year. On Monday, prices broke above $40 per ounce for the first time since 2011. Silver is also valued for its industrial use in clean energy technologies such as solar panels. Against this backdrop, according to industry group Silver Institute, the market is set for a fifth consecutive year of supply shortages. A weaker dollar has also boosted the purchasing power of major consumer countries such as China and India.

Investors have flocked to silver-backed ETFs, with holdings expanding for the seventh consecutive month in August. This has reduced silver inventories in London, leading to continued tightness in the market. Lease rates—which reflect the cost of borrowing the metal, usually for short terms—remain elevated at around 2%, far above the normal level close to zero.

Concerns over potential U.S. tariffs have also supported precious metals. Last week, silver was added to Washington’s list of critical minerals, which already includes palladium.

As of press time, spot gold was up 0.45% at $3,491.5 per ounce. The Bloomberg Dollar Spot Index was steady. Silver prices were little changed at $40.67 per ounce. Platinum prices rose, while palladium prices fell.