Gold hovers near record highs. Here’s where analysts say it’s headed next.

Gold (GC=F) hovered near record highs Thursday, supported by the Fed’s jumbo rate cut and a weakening dollar. Analysts expect the precious metal to go even higher.

Gold futures climbed to trade just above $2,600 after touching fresh records in the prior session immediately after the Federal Reserve announced a 50 basis point rate reduction.

Precious metals watchers said the size of the cut should support higher prices heading into next year as the dollar declines.

The US dollar (DX-Y.NYB), measured against a basket of currencies, traded above 100 on Thursday. The index has been in an overall downward trend since June.

“By cutting rates more than expected, the Fed is indirectly opening the door to an increased money supply, risking a second wave of inflation and a further weakening of the dollar,” said Alex Ebkarian, COO and co-founder of precious metals dealer Allegiance Gold.

The precious metal, which is priced in dollars, becomes more affordable to foreign buyers as the currency weakens. Lower rates also make gold attractive to investors, as it doesn’t provide an annual yield.

Goldman Sachs analysts recently made a case for higher bullion prices, as capital typically flows into gold-backed exchange-traded funds, or ETFs, when the Fed cuts rates.

The analysts wrote, “We expect a gradual boost to ETF holdings — and thus gold prices — from the Fed’s easing cycle.”

The firm predicts a price target of $2,700 by early 2025 as Western capital pours into ETFs, central banks continue to hoard the precious metal, and investors seek a hedge against geopolitical conflicts and recessionary risks.

Futures were pricing in a 50 basis point cut going into the Fed’s announcement on Wednesday.

Historically, Fed rate cuts have been followed by a sharp rise in gold prices, such as during the 2008 financial crisis and the 2020 pandemic.

Gold is up roughly 25% year to date as central banks have scooped up the precious metal at record levels.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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