(Reuters) – Goldman Sachs reiterated its optimistic outlook on gold prices on Monday, citing central bank demand and the imminent interest rate cut from the U.S. Federal Reserve at its policy meeting this week.

Gold prices rose to an all-time high at $2,589.6 an ounce on Monday, supported by a weaker dollar and the prospect of a big rate reduction by the Fed.

Markets are currently pricing in a 33% chance of a 25-basis-point U.S. rate cut at the Fed’s Sept. 17-18 meeting, and a 67% chance of a 50-bps cut, the CME FedWatch tool showed.

“While we see some tactical downside to gold prices under our economists’ base case of a 25bp Fed cut on Wednesday, we reiterate our long gold trading recommendation and our price target of $2,700/toz by early 2025,” the investment bank said in a note.

Goldman Sachs noted that while a structurally higher demand from central banks has reset the relationship at the price level, changes in interest rates continue to drive fluctuations in gold prices.

It also indicated that exchange-traded funds backed by physical gold are consistently rising as the Federal Reserve’s policy rate diminishes.

(Reporting by Anmol Choubey in Bengaluru; Editing by Alan Barona)