Since the start of the year, gold has already increased by 10%. The stellar rally of gold has pushed prices as far as they can go this year. After testing record highs just over a week ago, gold is trading in a broad range between $1,900 and $2,100.

The expectation that the Federal Reserve's rate hike cycle will soon end is one of the main reasons for the rise in gold prices. Economic uncertainty, inflation, and geopolitical tensions have also contributed to price growth. However, the potential for gold growth is limited. Any hawkish sentiments from the Federal Reserve may trigger a sell-off down to $1,900.

The Federal Reserve will not be able to lower rates as quickly as the markets expect. Accordingly, over the next few months, the U.S. dollar will put pressure on gold as the Fed's rate cut is pushed back to a later date.

But any drop in gold prices may be seen by investors as a buying opportunity. In 2024, when the Federal Reserve, the European Central Bank, and the Bank of England start to loosen their monetary policies, the gold market may gather pace in a bullish direction. A softening of monetary policy by the Federal Reserve, ECB, and the Bank of England is always a positive factor for the growth of the precious metal.

A new driver for the yellow metal is demand for ETFs, which finally recognizes the value of gold against resurgent recession fears. Problems in the U.S. banking sector, uncertainty regarding the debt ceiling, elevated interest rates worsen economic prospects and increase demand for gold and gold ETFs.

Despite Fed Chairman Jerome Powell's assurances that the U.S. banking system is reliable and stable, investors still have concerns. The increase in rates by 500 basis points over the past year is putting pressure on the U.S. banking system. According to a recent Federal Reserve report, about 722 banks reported unrealized losses of more than 50% of capital. This is prompting investors to diversify risks. For instance, following the Silicon Valley Bank crisis, the net increase in gold assets in ETFs was 56 tons.

Therefore, in any case, even with a correction or sell-off of gold, the precious metal has very positive prospects.