As the Federal Reserve approaches interest rate cuts, Wall Street's bullish sentiment on precious metals is growing stronger.

Is $3,000 the endgame?

This year, gold has outperformed the US stock market, and as the Fed gets closer to cutting rates, the bullish sentiment on precious metals is also intensifying.

In 2024, the price of gold has risen by about 21%, while the S&P 500 has risen by 16%.

Last Friday, the price of gold soared by 2.2%, once again setting a new historical high, breaking through $2,500 per ounce.

Although the weak US non-farm report earlier raised alarm bells, concerns about the US economy falling into a recession have eased after the release of CPI data and retail sales data.

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However, recent indicators suggest that weakness in key areas such as housing construction may prove that a more substantial rate cut by the Fed is justified.

When yield-bearing assets like bonds become less attractive in the face of a bleak long-term interest rate outlook, gold tends to rise.

Commerzbank's research department raised its forecast for gold prices in a report last Friday, expecting the Fed to cut rates three times by the end of this year and another three times in the first half of 2025.

Overall, this is two more rate cuts than the bank previously expected.

Carsten Fritsch, a senior commodity analyst at Commerzbank, wrote: "Therefore, we expect the price of gold to rise further to $2,600 by mid-next year, and considering the resurgence of inflation and speculation about rate hikes in the following year, we expect the price of gold to fall to $2,550 by the end of 2025 (previously forecasted at $2,200)."

Other analysts are more optimistic.

Bart Melek, head of global commodity strategy at TD Securities, said last Friday that, considering the Fed's easing prospects, the price of gold could reach $2,700 per ounce in the next few quarters.

Meanwhile, Patrick Yip, Senior Director of Business Development at the US Precious Metals Exchange, said at the end of last month that if geopolitical uncertainties persist, interest rates are cut, or global central banks continue to buy gold, the price of gold could reach $3,000 next year.

In fact, as countries like China, Turkey, and India seek to diversify their foreign exchange reserves and move away from the US dollar, especially after witnessing Western countries freezing Russia's dollar assets after the Russia-Ukraine conflict, central banks have been a major source of demand for gold.

J.P. Morgan estimates that central banks bought over 1,000 tons of gold last year.

The People's Bank of China ended its longest buying spree in May after 18 months of buying frenzy.

In June this year, the Reserve Bank of India increased its gold reserves to the highest level in nearly two years.

Meanwhile, concerns about a possible economic recession continue, which will drive demand for safe-haven assets like gold and force the Fed to make more substantial rate cuts.

"Black Swan" investor Mark Spitznagel, founder and chief investment officer of private hedge fund Universa Investments, said that an economic recession will occur this year as the largest market bubble in history is about to burst.

He said: "This time is no different; anyone who says it is has not been paying attention.

The only difference is that the scale of this bubble burst is larger than what we have seen before."