Goldman Sachs expects a short-term pullback in gold if the Fed chooses to cut interest rates by 25 basis points this week, but it predicts that gold will eventually hit a new record high as funds flow into gold ETFs.

In a report, Goldman analysts Lina Thomas and Daan Struyven noted, "A Fed rate cut would drive capital flows into Western gold ETFs, a factor that has been largely absent in the past two years of gold's rise." They reiterated Goldman's forecast that gold will reach $2,700 per ounce by early next year.

Goldman economists anticipate a 25-basis point rate cut from the Fed on Wednesday. Under this base-case scenario, gold may experience some tactical declines but is expected to rise as the Fed enters a cycle of easing, attracting gradual inflows into gold ETFs. (Gold 10)