Gold Price Surge | Key Factors Fueling the XAUUSD Rally to $2685

Gold is currently ranging between key levels of 2650 and 2675, and for long-term investors, betting against gold seems unwise. The XAUUSD’s upward momentum is backed by multiple global factors, and short trades are off the table for now, especially with bulls taking full advantage of the Federal Reserve's monetary policies.

The rapid expansion of the money supply has propelled gold to historic highs, surpassing $2,650 per ounce for the first time. This milestone comes amid increasing geopolitical tensions in the Middle East, which have only further fueled the precious metal’s rise. Additionally, India’s insatiable demand for gold has played a significant role in driving prices higher.

In August alone, India’s gold imports surged to a new record high of over $10 billion, with the country importing 131 tons of gold. This figure marks the sixth-largest monthly import in history. The primary catalyst behind this explosive demand is the recent reduction in import duties, which has bolstered the purchasing power of Indian consumers. The waning interest from China, once a major buyer of gold, makes India’s current frenzied demand even more remarkable.

The situation in the West is also contributing to gold’s bullish outlook. After 18 months of capital outflows from gold-backed exchange-traded funds (ETFs), the past three months have seen an inflow of funds, signaling renewed investor confidence. This reversal coincides with the Federal Reserve's shift toward monetary expansion, sparking increased demand for gold as a hedge against inflation and currency devaluation.

According to Chicago Fed President Austan Goolsbee, the central bank is still far from reaching a neutral rate, and the derivatives market projects a rate cut of 175 basis points in the current cycle. This scenario not only heightens the risk of a weaker US dollar but also sets the stage for a continued gold rally. Given these factors, gold could soon hit 2700, reinforcing its position as a strong long-term investment.

Summary: Gold prices have surged past $2,650 per ounce, driven by global demand, the Fed's monetary policies, and escalating tensions in the Middle East. India's record-breaking gold imports and capital inflows into gold ETFs suggest that betting against gold is risky. The price could reach 2700 as bulls continue to dominate the market.