At first glance, gold seems to have found the perfect environment — a weaker US dollar and falling Treasury yields. But markets change by leaps and bounds. The XAUUSD rally will have to wait. Let’s discuss it and make a trading plan.
The article covers the following subjects:
Major Takeaways
The Fed’s caution is creating problems for gold.The metal continues to flow from East to West.A stronger dollar is a bearish sign for XAUUSD.Traders should shift from selling below $3,300 to buying gold.
Weekly Fundamental Forecast for Gold
Gold’s best days may still lie ahead. The metal remains under pressure as the probability of a Fed rate cut in September has dropped from over 90% to 69%. Some FOMC members are worried about inflation risks, while others are more concerned about a cooling labor market. Investors are awaiting clues from Jerome Powell at Jackson Hole. Even hawkish rhetoric, however, will only push XAUUSD down temporarily, so bulls remain confident in the long-term outlook.
Sooner or later, the Fed will have to cut rates. There is some confidence this will happen in September, but then the central bank may pause again — possibly until a new chair is appointed. Derivatives markets are betting that a Trump ally at the Fed will help the White House achieve its goals of weakening the dollar and lowering Treasury yields. That would provide a tailwind for gold. For now, though, the metal remains under pressure.
Swiss Gold Exports to the US
Source: Bloomberg.
Gold has risen by 25% since the start of the year, though all of its gains came between January and April. The last spike was driven by rumors of US tariffs on Swiss gold imports. Although that turned out to be false, the flow of bars from Europe to the US picked up in July. In theory, that should support XAUUSD.
Still, by late summer, gold has been reacting more to geopolitics, the US dollar, and Treasury yields. After the US and Russian presidents met, investors began to hope for a quick end to the war in Ukraine. That could be a serious blow to XAUUSD. Since the start of the conflict in February 2022, gold prices have climbed 1.7 times, in part due to the freezing of Russia’s reserves. Losing that driver would put significant pressure on gold.
That said, Trump’s stance changes frequently. Today, he may listen to the Kremlin; tomorrow, he may impose new sanctions. Geopolitical risks haven’t gone away, meaning that gold still has a foundation to stand on.
What makes gold uncomfortable now is the strengthening US dollar. As the market emerges from its summer lull, rising Forex volatility in September could fuel further greenback rallies. The dollar is widely used as a funding currency in carry trades, and unwinding those positions pushes the USD index higher.
Forex Volatility Dynamics
Source: Bloomberg.
Weekly Trading Plan for XAUUSD
Risks of a bearish correction are growing, with XAUUSD possibly breaking out of its medium-term consolidation range at $3,250 – 3,400. However, in the medium term, traders should gradually shift from short-term selling, including positions below $3,300 per ounce, to buying gold.
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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