Central banks are ramping up their gold purchases, increasing the precious metal’s share in global reserves to 20%. The euro has fallen to third place with 16%. The US dollar remains the leading reserve currency. The weakness of the euro has created a favorable environment for the XAUUSD. Let’s discuss these topics and make a trading plan.
The article covers the following subjects:
Major Takeaways
Gold has overtaken the euro in central bank reserves.Rising geopolitical risks are supporting the precious metal.The decline in the dollar and Treasury yields is supporting XAUUSD quotes.One can buy gold if the price breaks through the resistance level of $3,400.
Weekly Fundamental Forecast for Gold
Central banks were so frightened that the West froze Russian assets that only massive gold purchases helped them alleviate this stress. Against this backdrop, gold’s share in global foreign reserves at the end of 2024 was 20% at market prices, the second-highest figure after the US dollar’s 46%. The euro’s share fell to 16%. This buying frenzy was one of the main drivers of the gold rally. Since the end of 2022, XAUUSD prices have doubled, reaching an all-time high above $3,500 in April.
Gold’s Share in Global Central Banks’ Foreign Reserves
Source: Bloomberg.
With central banks planning to purchase 1,000 tons or more of gold for the fourth consecutive year and the dollar and US Treasury bond yields falling, gold is poised for growth. At the end of 2024, regulators’ precious metal reserves were estimated at 36,000 tons, close to the 1965 record high of 38,000 tons.
Global Gold Reserves Held By Central Banks
Source: Bloomberg.
The lack of acceleration in US inflation due to tariffs has become another reason for XAUUSD to return to the upper boundary of its $3,100–$3,500 range. Historically, the price of gold has been sensitive to real Treasury yields. If they remain low, the precious metal rises. Furthermore, if consumer prices remain stable or decline, the Fed resumes its cycle of monetary expansion, creating a strong tailwind for gold prices.
At the same time, the weakening US dollar is providing support for gold. Since the precious metal is quoted in US dollars, the decline of more than 9% in the USD index since the beginning of the year is a favorable factor for the XAUUSD.
Geopolitical factors also play a pivotal role. Donald Trump has failed to end the armed conflict in Eastern Europe, and the situation in the Middle East is escalating. Iran has threatened to strike US military bases if negotiations with the US on its nuclear program fail. The US administration is reducing its presence in the region and instructing all nonessential personnel to leave.
Due to the growing geopolitical risks in the Middle East, TD Securities has announced the opening of a strategic long position on the XAUUSD, targeting a price of $3,650. The company expects gold to reach this target within a month.
Weekly Trading Plan for Gold
Undoubtedly, gold is surging on numerous bullish factors. However, the de-escalation of trade wars and the current high global risk appetite could hinder its growth. Currently, positions opened on rebounds from the upper or lower boundaries of the medium-term consolidation range of $3,100-$3,400 per ounce are deemed effective. However, if the asset violates the resistance level of $3400, long trades can be increased. Otherwise, a rebound will provide a lucrative opportunity to open 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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