Gold's Position Pre-Jackson Hole: A Case for Strategic Positioning in a Rate-Cut Cycle

The U.S. Federal Reserve's projected 85% probability of a 25-basis-point rate cut in September 2025 has created a compelling window for investors to position in gold. This move, driven by moderating inflation, a cooling labor market, and geopolitical uncertainty, underscores gold's role as a tactical asset in a rate-cut cycle. As the Fed navigates its dual mandate of price stability and maximum employment, gold's interplay with dollar dynamics, inflationary pressures, and global risks offers a unique opportunity for strategic positioning.

The Fed's Dovish Pivot and Gold's Response

The CME Group's FedWatch tool currently prices in an 85% chance of a September rate cut, a sharp rise from 59% in July 2025. This shift reflects weaker labor market data, including a revised unemployment rate of 4.2% and a July jobs report adding just 73,000 nonfarm payrolls. While inflation remains above the Fed's 2% target (2.7% annualized in July), the trajectory of core CPI (3.1% year-over-year) suggests a path toward normalization.

Gold has historically thrived in environments of falling real interest rates. With the real Federal Funds Rate negative for much of 2025, the opportunity cost of holding non-yielding assets like gold has diminished. J.P. Morgan Research forecasts gold prices averaging $3,675 per ounce by Q4 2025, with a potential push toward $4,000 by mid-2026. This projection is underpinned by central bank demand (projected at 900 tonnes in 2025) and investor inflows into gold ETFs, which have surged to record levels.

Dollar Weakness and Gold's Inverse Relationship

The U.S. dollar index (DXY) has declined over 7% year-to-date in 2025, making gold cheaper for non-U.S. investors and amplifying global demand. A weaker dollar often correlates with higher gold prices, as the metal is priced in the world's reserve currency. The Fed's anticipated rate cuts will likely accelerate this trend, further supporting gold's appeal.

Geopolitical tensions, including U.S. tariffs and U.S.-China trade frictions, have also fueled demand for gold as a hedge against currency devaluation. Central banks in emerging markets, such as China and Russia, are diversifying reserves away from the dollar, with gold purchases exceeding 1,000 tonnes annually since 2022. This structural shift reinforces gold's role as a strategic reserve asset.

Geopolitical Uncertainty and Safe-Haven Demand

Gold's status as a safe-haven asset is further bolstered by geopolitical risks. The Jackson Hole 2025 symposium, where Fed Chair Jerome Powell will address policy, could amplify market volatility. A dovish pivot—such as a clear signal of rate cuts—could weaken the dollar and push gold toward $3,400 per ounce. Conversely, a hawkish stance prioritizing inflation control might temporarily strengthen the dollar but is unlikely to offset the broader trend of dollar de-dollarization.

Investors are also factoring in the potential for a half-point rate cut, as advocated by U.S. Treasury Secretary Scott Bessent. While the Fed remains cautious about inflation rebounding due to tariffs, the growing divide within the FOMC—evidenced by dissenting votes from governors like Christopher Waller—suggests a policy shift is imminent.

Tactical Positioning: ETFs, Miners, and Physical Bullion

For investors seeking exposure, gold ETFs like SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) offer liquid and cost-effective access. GLD, with $101.4 billion in assets under management, has seen year-to-date inflows of 310 tonnes, reflecting strong institutional and retail demand.

Gold miners, such as Newmont Corporation (NEM) and Barrick Gold (GOLD), provide leveraged exposure to rising gold prices. NEM has surged 80% in 2025, driven by higher gold prices and disciplined capital allocation. Diversified mining ETFs like VanEck Gold Miners ETF (GDX) offer a balanced approach to sector growth.

Physical bullion remains a cornerstone for long-term positioning, particularly as geopolitical tensions persist. The introduction of U.S. tariffs on large gold bars in August 2025 has added volatility, but demand for physical gold in Asia and the Middle East remains robust.

Strategic Conclusion: Balancing Risks and Rewards

The September 2025 FOMC meeting represents a critical juncture for gold investors. A 25-basis-point rate cut, combined with a weaker dollar and elevated geopolitical risks, creates a favorable environment for gold. While short-term volatility is possible—particularly around Jackson Hole—gold's structural bull case remains intact.

Investors should consider a diversified approach, combining ETFs, miners, and physical bullion to capitalize on the rate-cut cycle. With central bank demand at record levels and J.P. Morgan projecting gold to reach $4,000 by mid-2026, the case for strategic positioning in gold is both compelling and timely. As the Fed navigates uncharted territory, gold's role as a hedge against inflation, currency debasement, and global uncertainty will only grow in importance.