Gold quotes were buoyed by central banks and de-dollarization in 2022–2023 and by Fed rate cuts in 2024. However, the XAUUSD will likely lose its advantages at the end of 2024 or the beginning of 2025. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The XAUUSD fails to revive its uptrend.
- A pause in the Fed’s monetary expansion may trigger a correction in gold prices.
- The precious metal can be saved by the US dollar’s collapse in the second half of 2025.
- Gold may drop below $2,600 per ounce.
Weekly Fundamental Forecast for Gold
What are the similarities between gold and the Titanic? Both believed that they were unsinkable. Despite the November sell-off, the precious metal has gained almost 28% since the beginning of the year, and Goldman Sachs continues to anticipate that it will reach $3,000 per ounce in 2025. UBS projects that the price will reach $2,900. The WGC maintains a more cautious outlook, predicting that XAUUSD quotes may increase if central banks maintain a high appetite and demand for safe-haven assets due to the global GDP slowdown. However, there is some unfavorable news.
The World Gold Council anticipates that extended periods of monetary easing during a resurgence of inflation will present an insurmountable challenge for the XAUUSD. This naturally brings us back to the Fed. The US economy is robust, and in such an environment, prices are likely to accelerate rather than decelerate. Most Financial Times experts believe that the federal funds rate is unlikely to descend below 3.5% by the end of 2025, representing a stark contrast to the previous survey.
Fed Funds Rate Forecast
Source: Financial Times.
The potential acceleration of US GDP to 3.3% in the fourth quarter, as predicted by the leading indicator from the Atlanta Fed, and the growing risks of further CPI and PCE increases are forcing the Fed to signal a pause in the monetary expansion cycle in January. This is particularly relevant given that the first FOMC meeting in 2025 will precede the inauguration of Donald Trump. Without a decline in interest rates, gold will unlikely post significant gains.
Indeed, XAUUSD bulls are responding to record demand in India and the resumption of precious metal purchases by the People’s Bank of China, which is expected to continue to acquire gold in anticipation of trade wars. However, the WGC does not believe that central banks will have the same appetite for gold in 2024–2025 as in 2022–2023. The increase in interest from Indian consumers is due to the reduction of duties on imports to 6% from 15%, so this factor is definitely short-lived.
The precious metal may benefit from the weakening of the US dollar in the second half of 2025, as discussed by major banks. They are referencing the years of the first presidential term of Donald Trump when the USD index demonstrated growth on expectations of tariffs but declined following their implementation.
US Dollar’s Performance Against Its Counterparts by End of 2025
Source: Bloomberg.
As it was previously noted, gold may resume its upward trajectory, though not within the projected 3-6 month time frame. It will encounter significant headwinds in the near term, as the de-dollarization and central bank purchases are waning, and the Fed is ready to pause its monetary expansion cycle.
Weekly Trading Plan for Gold
Against this backdrop, it is crucial to adhere to the strategy of selling the XAUUSD as it gains momentum. Short trades formed on a rebound from the resistance level of $2,715 per ounce can be kept open. One can consider opening more short positions, betting on a decline below $2,600.
Price chart of XAUUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
