Economic and geopolitical uncertainty tend to be positive drivers for gold, due to its safe-haven status and ability to remain a reliable store of value. It has low correlation with other asset classes, so can act as insurance during falling markets and times of geopolitical stress.

In addition to interest rate drivers and geopolitical concerns, data shows there has also been a reluctance by physical holders to sell gold. A general aversion to short bullion financially, despite the outsized rally, underscores gold’s structurally bullish drivers outside of U.S. real yields.

“Amid fraying geopolitics, increased sanctioning and de-dollarization, we observe an increased appetite to buy real assets including gold,” Shearer said.

With gold prices hovering around all-time highs, is another bullish run expected for the precious metal as rates begin to fall?

“Many of the structural bullish drivers of a real asset like gold  — including U.S. fiscal deficit concerns, central bank reserve diversification into gold, inflationary hedging and a fraying geopolitical landscape —have lifted prices to new all-time highs this year despite a stronger U.S. dollar and higher U.S. yields, will likely remain in place regardless of the U.S. election outcome this autumn,” said Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan. “Nonetheless, precious metals markets will be focused on any potential policy changes that could accentuate or alter one or more of these themes.” 

“Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” Shearer said.

Any retracement in the coming months could provide investors with an opportunity to begin positioning for further strengthening, ahead of the Fed’s planned cutting cycle.

As central banks are buying more gold structurally, it also appears they are becoming a bit more tactical around price.

"We think the price level of gold has minimal impact on long-term central bank acquisition plans, however, price changes do appear to influence the pace and cadence of net purchasing,” Shearer added.

China’s record gold imports might face downward pressure after the People’s Bank of China—which controls the amount of gold entering China via quotas to commercial banks—paused reported gold reserve purchases in May, ending a massive buying spree that ran for 18 months. However, central banks and other physical consumers are expected to remain strong dip buyers, supporting a higher floor in gold prices.  

Along with central bank interest, increased investor appetite in the physical gold market should also be a major flow contributor to future gold rallies. Total ETF holdings in gold have fallen steadily since mid-2022, but so have London vault holdings of gold as demand from EM central banks and physical consumers have physically offset ETF outflows.

A re-lengthening of investor ETF holdings triggered by the onset of a cutting cycle could quickly act to tighten up the physical gold market and is expected to be positive for bullion and supportive of a climb in prices in the second half of 2024

“While gold price movements may be fully decoupled from real yields and Fed pricing for now, we still think this would add an extra pillar of support later this year mainly through an eventual shift back toward retail ETF inflows, as money market funds become less attractive. Gold prices have already jumped higher even as ETF holdings have continued to sag, and a turnaround here could be quite bullish, driving another sustained leg higher in prices,” Shearer noted.