Gold is knocking on the door of 3,500 for the second time. While gold has been trending upward since just before the Covid shock, the move since April has been sideways. What has changed to cause this sudden surge? 

What Drives Gold Prices? 

Gold is seen as a safe haven, and when risks are high, people flock to it. But when stock markets are surging, can we really say risks are elevated? The answer is yes. 

In Europe, political risks are high with France’s problematic budget, an incoming no-confidence vote, and the painful process of establishing another government without an election for the third time. 

Globally, the fiscal outlook shifted dramatically after Covid. Debt was already rising before the pandemic, and Covid accelerated the trend. Now most  developed economies that thrived on low rates for years are facing the cost of high spending. When both budget spending and bond yields rise to multi-decade highs, fiscal risks increase, and gold tends to benefit the most. 

On top of that, US stagflation risks are rising with the new tariffs. As Powell noted in his Jackson Hole speech, risks for both inflation and unemployment are tilted to the upside (check our September report for more details). Gold is traditionally a hedge against inflation but is negatively affected by high rates, which usually balance each other out. In the current environment, however, inflation is rising while the Fed is considering rate cuts, which is very positive for gold. 

As for geopolitical risks, gold is not pricing them in as strongly as it once did. Still, after the tariffs, the US–Europe alliance appears to be losing ground, and there is a risk that a new economic order could form around the China–India–Russia triangle. China and India, in particular, are likely to be the two key countries driving global growth in the years ahead. This shift could bring additional long-term risks between US and China. 

(Rate Cut Expectations vs Gold) 

But the main driver behind the latest surge in gold comes from Fed rate cut expectations. Since the start of the year, there has been an 82.4 percent correlation between rate cut pricing in the futures market and gold, and this correlation has become even stronger in recent days. 

The number of expected rate cuts until the end of 2026 has risen from 2.5 at the start of the year to 5 by the time of Jackson Hole. After Powell’s speech, in which he said that “shifting balance of risks may warrant adjusting our policy stance,” rate cut expectations jumped to nearly 6. 

Six cuts within roughly a year usually signal a recession. This means the market is either overpricing the risk or genuinely sees a serious threat to the economy. The risk is not only for growth and employment but also for inflation. The Fed may face significant challenges in 2026, which for now is bullish for gold. 

(ETF Gold Holdings – Comex Gold Inventory) 

Gold is also seeing positive pressure from ETFs. Demand remains strong, from central banks to households around the globe. ETF inflows and high COMEX inventories confirm that demand is still elevated. 

(Gold) 

From a technical perspective, gold has formed an ascending triangle, a pattern that most often breaks to the upside. True to form, the triangle broke higher. The 3,450 resistance was an important level, and with that breakout, the medium-term trajectory is likely to shift. 

The final barrier for the bulls is the 3,500 level, which is largely a psychological resistance. As long as 3,450 holds on weekly closes, bulls are likely to remain in control, and any downward reactions are likely to create more buying opportunities. 

Immediate resistance levels are at 3,500 and 3,520. Above those, 3,545 and 3,605 could provide significant resistance.