Gold's latest rally, triggered by expectations of US rate cuts, concerns about Federal Reserve independence and strong demand from investors as well as the central bank, is likely to propel prices to new records in the coming weeks.

Analysts see spot gold, which hit a record high of $3 527.5 as of 17:00 GMT on Tuesday, in a $3 600 to $3 900 range in the near to medium term, with potential to test the $4 000 level in 2026 if economic and geopolitical uncertainties persist.

Gold has gained more than 34% this year and analysts have steadily raised their average 2025 price outlook from $2 756 an ounce in January to $3 065 in April and most recently to $3 220 in July, according to Reuters polls.

Fed chairperson Jerome Powell's acknowledgment of rising employment risks has seen financial markets betting on a September interest rate cut.

"Supportive for gold is the bearish dollar outlook underpinned by expectations of Fed cuts, investors distancing from US assets and tariff-related economic uncertainty," said Ricardo Evangelista, senior analyst at ActivTrades.

The dollar has fallen nearly 11% since Donald Trump returned to the White House in January. A softer dollar makes the greenback-priced gold less expensive for holders of other currencies.

Meanwhile, Trump's criticism of Powell and attempts to remove Governor Lisa Cook have heightened concerns over the Fed's independence and sparked further gold purchases.

"The most bullish wildcard is... potential interference with the US Federal Reserve and concerns about the dollar's status as a safe-haven," said Julius Baer analyst Carsten Menke.

Among other factors fortifying gold's appeal are security concerns emanating from the Middle East and between Russia and Ukraine and central bank demand, particularly from developing countries.

That includes China's central bank adding gold to its reserves for the ninth consecutive month in July.

World Gold Council data shows central banks plan to increase gold holdings as a share of their reserves, while reducing dollar reserves over the next five years.

"The combination of a rising gold price and central bank accumulation means that gold shares of reserves have risen steeply for some central banks," said Michael Hsueh, Deutsche Bank's precious metals analyst.

Gold-backed ETFs have also seen significant inflows. SPDR Gold Trust GLD, the world's largest physically-backed gold ETF, said its holdings rose to 977.68 tons for a 12% increase so far this year and its highest since August 2022.