The main driver behind this wave of gold rising to 2500: Western investors are back

Western investors are embracing the US interest rate cut this year, returning to the gold market in droves, pushing gold prices to a historic high this week.

Thanks to institutional investor purchases and bullish bets from hedge funds, gold prices reached a new high of $2,531 per ounce during Tuesday's trading, driving the price of gold up by more than one-fifth this year.

In the past year, despite the gold-buying frenzy among Asian investors, Western investors have been on the sidelines. Now, with the Fed's interest rate cut looming, Western investors have also joined the gold-buying frenzy.

Data from the World Gold Council shows that since May, physical gold ETF holdings have increased by 90.4 tons, equivalent to $7.3 billion, with seven out of the past eight weeks seeing positive net inflows.

At the same time, on the Chicago Mercantile Exchange, the main futures benchmark for gold reached a post-pandemic high, adding over 100 tons in the week ending August 13.

Gold has been on a strong upward trend since the end of 2022, but recently prices have surged from around $2,300 per ounce in June to new highs, driven by major US and European buyers preparing for interest rate cuts.

John Reade, Chief Market Strategist at the World Gold Council, stated:

We are seeing Western investors and speculators returning to the gold market, and it is these fast money flows that are driving the rise in gold prices.

Ahead of Fed Chairman Powell's speech on Friday, gold prices were supported by expectations of a September rate cut by the Fed, with the market expecting a nearly one percentage point cut by the end of this year.

Furthermore, opaque purchases in the over-the-counter market, especially from family offices concerned about potential dollar depreciation, have also boosted gold prices. Demand from India has also surged in recent weeks, thanks to traditional purchases during Diwali and import duty cuts that took effect last month