Since the end of April, gold has remained in a state of consolidation. Investors believe that trade wars have begun to subside. In this case, the monetary policy and the slowdown in the US economy have provided a favorable environment for XAUUSD quotes. Let’s discuss these topics and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The cooling of the US economy has buoyed gold prices.
- The Fed is likely to throw a lifeline to the US GDP.
- Central banks continue to buy the precious metal.
- The XAUUSD’s trajectory depends on whether it can break the resistance level of $3,400.
Weekly Fundamental Forecast for Gold
The price of gold increased in response to the ADP’s release of employment figures for the private sector, which was the worst in two years, as well as the fourth decline in the PMI for the services sector below the critical 50 mark in the last 60 months. The derivatives market has increased the likelihood of the Fed easing monetary policy in September from 66% to 76%. Investors believe that the US regulator will provide a much-needed boost to the US economy through measures beyond simply lowering interest rates.
The XAUUSD was supported by the fastest decline in US Treasury bond yields since mid-April. The markets appear to have reverted to historical patterns, where declining debt market rates and the US dollar generate favorable conditions for the precious metal. As a result, the potential resumption of the upward trend in Treasury yields has not alarmed gold investors. Meanwhile, there are rumors that the Fed may increase its asset purchases to stabilize the bond market.
Donald Trump’s tariff policy has allowed the precious metal to take advantage of its previous growth drivers. The most critical issue, the collapse of the global trade system, has been averted. The only remaining uncertainty is related to trade. Given the ongoing demand for bullion from central banks and China, as well as the imminent resumption of the Fed’s monetary expansion cycle, this sets the stage for a bullish scenario for XAUUSD quotes.
Central Banks’ Gold Reserves
Source: Bloomberg.
Gold reserves held by regulators have reached their highest levels since the 1970s. According to Goldman Sachs, central banks are currently purchasing approximately 80 tons per month, amounting to $8.5 billion. According to the WGC, this figure amounts to approximately 1,000 tons per year or roughly a quarter of the global supply. According to HSBC, one-third of 72 central banks intend to purchase gold in 2025, and none anticipate selling it.
Central Banks’ Gold Purchases
Source: Bloomberg.
The regulators’ insatiable appetite for gold has prompted Goldman Sachs to predict that the XAUUSD rally will hit $3,700 by the end of 2025.
It is not clear that the most severe aspects of the trade conflict have passed. The US administration’s letters to numerous countries, reminding them that the days until the end of the 90-day tariff-free period are rapidly diminishing, indicate that Donald Trump’s patience is waning. The US president could make a sudden announcement, and the rising uncertainty surrounding Washington’s economic policy could lead to a significant increase in demand for safe-haven assets.
Weekly Trading Plan for Gold
The assumption that gold will consolidate in the medium term within the range of $3,100 to $3,400 per ounce has been fully validated. After falling to the lower boundary of the trading channel in mid-May, the precious metal quickly recovered and moved towards the upper boundary. The instrument’s subsequent trajectory will hinge on whether it can pierce the resistance level of $3,400. If so, long trades can be considered. Otherwise, a rebound may provide an opportunity for profit-taking and opening short trades.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAUUSD in real time mode
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