Markets were mostly favoring a big half-point interest rate cut by the Federal Reserve on Wednesday and while risk assets can travel higher in the short term, Goldman Sachs outlined what could go wrong further down the line after a jumbo-sized rate reduction.

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 advanced to a record high after the Federal Reserve lowered its benchmark interest rate by a half a percentage point Wednesday, in an aggressive start to a policy shift to boost the labor market and defend the economy.

Gold prices gained on Wednesday, as investors awaited for the Federal Reserve to start its U.S. monetary easing cycle for the first time in over four years. Spot gold rose 0.3% to $2,577.75 per ounce as of 9:30 a.

Gold may face a minor, near-term setback if the Federal Reserve opts for just a 25-basis-point cut this week, but the metal will subsequently rally to a record aided by rising flows into bullion-backed exchange-traded funds,

Gold is likely to experience a short-term decline if the Federal Reserve opts for a modest 25-basis-point interest rate cut this week, but Goldman Sachs analysts expect the metal to stage a strong rally soon after.