(Kitco News) - The Federal Reserve’s cautious resumption of the easing cycle has taken some momentum away from gold, as prices have been unable to hold gains above $3,700 an ounce. But while the market could see more profit-taking in the near term, analysts note that gold remains well-supported.
Despite the fall from its intraday record highs, gold has marked another record weekly close. Spot gold last traded at $3,683.10 an ounce, up 1% from last Friday.
Philippe Gijsels, Chief Strategy Officer at BNP Paribas Fortis, said that while gold prices could bounce around $3,600 an ounce in the near term, it is difficult to see them dropping materially lower as the Federal Reserve has restarted its easing cycle.
He added that investors have only just begun reentering the market, and with so much economic uncertainty, he expects to see aggressive buying on dips.
“Although the rally looks overdone with prices up nearly 40%, we are still in the early stages of this bull market,” he said. “Because of all the uncertainty in the world, there is still massive buying potential in gold and prices can still easily get to $4,000 by year-end or early 2026.”
Christopher Vecchio, head of futures strategies and forex at Tastylive.com, said that he also sees plenty of value in gold as it dominates global financial markets as an essential monetary asset.
“Is gold still a buy at $3,700 an ounce? In this environment, unequivocally that answer is: yes,” he said. “I keep trying to find a reason to be bearish gold, and that scenario continues to elude me.”
Vecchio added that even at elevated prices, central banks will continue to buy gold as faith in the U.S. dollar erodes. He noted that not only is the U.S. government trying to force the Federal Reserve to aggressively lower interest rates even as inflation pressures rise, but the national debt also continues to grow at an unsustainable pace.
“Central banks will continue to incrementally diversify away from the U.S. dollar, and the only real alternative they have is gold,” he said.
Although the Federal Reserve has mapped out a less aggressive monetary policy path than some market participants were expecting—signaling potentially two more rate cuts this year and one more in 2026—some analysts note that there is still potential for more aggressive easing, especially if President Trump is able to appoint additional governors to the board.
The only dissenting vote in Wednesday’s monetary policy decision came from recent Trump appointee Stephen Miran, who favored a 50-basis-point cut.
“[Wednesday’s] voting behavior by Trump confidant Miran, who was probably also the one in the FOMC who preferred interest rate cuts of 125 basis points by the end of this year, gives us a taste of what might come,” said Carsten Fritsch, Commodity Analyst at Commerzbank, in a note Friday. “Such aggressive interest rate cuts, despite the continuing threat of inflation, would catapult the price of gold even higher.”
Markets could be particularly interested in what Miran has to say when he speaks on Monday at an event hosted by the Economic Club of New York.
While gold remains in a solid uptrend, some analysts caution that investors should be prepared for volatility as profit-taking emerges at elevated price levels.
Gold’s brief rally above $3,700 an ounce this week has driven prices up more than 40% year-to-date, marking its strongest annual gains since the late 1970s.
“Gold traders, observing the year-to-date gains and considering the Fed’s monetary policy path somewhat clearer, view it as an opportunity to take profits off the table,” said Naeem Aslam, Chief Investment Officer at Zaye Capital Markets. “This has certainly triggered a sell-off in the price of the metal. Consequently, I believe it is highly likely we will see some consolidation in prices.”
However, Aslam added that gold will be particularly sensitive to next week’s inflation data.
“If inflation proves more stubborn than expected or if new political headlines spark volatility, gold could accelerate toward US$3,750–US$3,800 in short order,” he said.
Along with inflation data, markets will also be watching manufacturing and home sales figures.
Economic data to watch next week
Monday: Stephen Miran speaks at the Economic Club of New York
Tuesday: US S&P Flash PMI
Wednesday: US New Home Sales
Thursday: Swiss National Bank monetary policy decision, US Final Q2 GDP, US Durable Goods Orders, US weekly jobless claims, US Existing Home Sales
Friday: US PCE, Revised UofM Consumer Sentiment
