What's secretly pushing gold prices to record highs?

Gold prices have increased sharply in the past two years, but the upward trend is expected to continue due to the looming risk of stagflation in the US.

Two years of record acceleration

The world gold price has increased impressively over the past two years, reflecting global economic instability and geopolitical factors. According to data from Kitco News, in 2024, the gold price increased by 29%; from the beginning of 2025 to now (end of August), gold has increased by 28%.

This trend appears to be continuing, with investors flocking to gold as a safe-haven asset.

In the trading session on August 28 on the New York market (ending early morning August 29, Vietnam time), the spot gold price increased from 3,385 USD/ounce to over 3,420 USD/ounce, reaching the highest level in a month.

The move was supported by the continued weakness of the US dollar, with the USD Index down 0.32% to 97.81 points.

In the domestic market, gold prices also recorded three consecutive sessions of new record highs. On the morning of August 29, the price of SJC gold bars reached a new peak of VND128.9 million/tael (selling price), while the price of gold rings also hit a record of VND123.6 million/tael (selling price), reflecting high domestic demand due to concerns about inflation and currency fluctuations.

Factors driving the strong gold price rally over the past two years include geopolitical tensions, persistent inflation and loose monetary policy. Since 2023, gold has been supported by record buying from central banks diversifying their reserves away from the US dollar. More recently, the weakening of the US dollar has been a major driver.

Gold prices are forecast to continue to increase in the medium and long term. Photo: Kitco

Investors expect the US Federal Reserve (Fed) to continue cutting interest rates. The market forecasts that the Fed could cut interest rates twice in the rest of 2025, possibly starting in September, by 25 basis points each time, based on weak labor data and stable inflation around 2.8-3%.

One notable factor is the war between US President Donald Trump and the Fed. Mr. Trump has repeatedly criticized Fed Chairman Jerome Powell for not lowering interest rates quickly, even threatening to fire him. Recently, Mr. Trump announced the dismissal of Fed Governor Lisa Cook on charges of mortgage fraud, marking the first time in the 111-year history of the Fed that a president has made such a decision.

Investors see a major risk to the Fed’s independence, which has helped the central bank fight inflation and unemployment. Historically, the Fed has often resisted short-term requests from presidents to focus on long-term economic health.

But that independence is now being questioned after Mr Trump, in an effort to eliminate “islands of independence” in government , fired the heads of agencies such as the Federal Reserve, the CDC and the Bureau of Labor Statistics. Many experts warn that this could threaten global economic stability and undermine the credibility of US institutions.

When will the multi-year gold price rally end?

In the short term, gold prices may be volatile and correct lower after a series of consecutive increases. Organizations such as Saxo Bank warn that gold may face pressure if inflation temporarily increases, causing the Fed to hesitate to cut interest rates, leading to a temporary recovery of the USD. However, the support level around $ 3,300 / ounce has remained firm since late May.

In the medium and long term, many factors support gold's continued rise. The US is entering a cycle of interest rate cuts despite inflation remaining high at nearly 3%, higher than the previous target of 2%. This creates a "fertile ground" environment for gold, as the opportunity cost of holding the non-yielding metal decreases.

The US dollar is expected to continue to weaken due to pressure from rising US public debt, the Trump administration's desire to reduce interest rates on public debt loans, and the global de-dollarization trend, with countries such as China, India and Türkiye increasing their gold reserves.

Samson from Fidelity International stressed that the US is at high risk of stagflation - slow growth combined with high inflation - due to tariff policies and a weak labor market.

Samson noted that gold rallies typically last for years, and given the current level of volatility, gold still has room to rise. Fidelity maintains a positive position on gold in its portfolio, viewing it as a safe haven and diversifier.

Similarly, Bank of America (BofA) has just maintained its forecast that gold prices could reach $4,000/ounce in the first half of 2026, thanks to a weakening USD and a trend of interest rate cuts amid high inflation. BofA experts warned that the risk of eroding the independence of the Fed and statistical agencies could cause the USD to continue to decline, thereby supporting gold.

Saxo Bank added that the US bond yield gap is also a factor supporting gold, as short-term yields fall while long-term yields rise due to concerns about public debt and the independence of the Fed.

Overall, despite short-term fluctuations, the medium- and long-term trend of gold is forecast to be positive by most organizations, with the potential to exceed $4,000/ounce if inflation and US political risks increase.

Source: https://vietnamnet.vn/dieu-gi-dang-am-tham-day-vang-tang-gia-ky-luc-2437481.html