Gold prices have increased to $2,620 an ounce this Monday morning, a modest increase from $2,595 at the end of last week. This price marks another historic high for gold.

Last week's boost to gold prices was a direct result of the Federal Reserve's significant 50 basis point cut, which brought the Fed funds rate to a range of 4.75% to 5%. This aggressive cut, marking the beginning of the Fed's' interest rate normalization,' is a key factor in the gold market, aiming to achieve a benchmark rate between 3% and 3.5% by 2025.

Over the weekend, tensions in the Middle East escalated further, potentially impacting the gold market. After the mysterious pager explosions injuring or taking the lives of Hezbollah leadership, the war is expanding into Lebanon. The Israel Defense Forces this morning said it launched widespread waves of airstrikes against Hezbollah targets in Lebanon, as it warned civilians to swiftly move away from homes used by the Iran-backed terror group to store weapons. 

The combination of U.S. monetary policy, geopolitical developments, and investor sentiment promises to keep demand for the gold market volatile in the coming months.

Central banks and Chinese investors have been the main players in the gold market for the past two years. However, with lower interest rates and a slowing economy at home, Western investors are beginning to re-enter the market, potentially influencing its future trajectory.

The Core PCE Index is the Federal Reserve's preferred measure of inflation. Core PCE excludes food and fuel — two categories that frequently experience price swings. Increases in both PCE and core PCE can signal an increase in inflation; decreases may signal a decline in inflation.

While the Federal Reserve issued strong guidance last week for the next 18 months of rate cuts, it did reserve the right to change policy based on future data reports. Federal Reserve Chair Jerome Powell said last week that mass immigration across the border raises unemployment rates in the U.S. Jerome stated that the mass immigration contributed to the Fed's decision to lower interest rates.

Gold achieved countless record-high prices during an environment of high interest rates. As we move into a lower interest rate environment in the United States, gold prices traditionally increase as Treasury bonds, which compete as low-risk investments, have lower rates with less favorable returns. Factor in the Ukraine and Russia War and the war in the Middle East, and gold prices have several reasons to climb for the rest of 2024.