empty
26.12.2024 12:29 AM
Gold Faces Its Death Warrant

Slow down, gold bulls! In 2024, gold prices skyrocketed by 30% from the beginning of the year, reaching an all-time high of $2,790 per ounce. This surge was driven by aggressive purchases by central banks and widespread monetary policy easing. However, the Federal Reserve's decision to pause its actions, along with rumors of a potential ceasefire in Eastern Europe, has dampened the bullish momentum for XAU/USD.

Commodity Market Asset Dynamics

This image is no longer relevant

Tanglewood Total Wealth Management observes that during the Cold War, central banks allocated approximately 30% of their funds to gold purchases to replenish their reserves. However, before the conflict in Ukraine, this figure had decreased to 10%. Since then, it has risen back to nearly 20%. As a result, developments in Eastern Europe are crucial for the XAU/USD currency pair. If Donald Trump succeeds in ending the war, the value of the precious metal could face significant pressure.

Gold is already being affected by the slowing monetary policy easing cycles of major central banks around the world. The Fed, after a rate cut, indicated a pause in January. The Bank of England decided not to adjust its borrowing costs. Similarly, both Canada and Mexico have abandoned plans for aggressive 50-basis-point rate increases, and the Swiss National Bank's statements have raised doubts about the continuation of monetary easing cycles.

Central Bank Rate Trends

This image is no longer relevant

As central banks lower interest rates, fiat currencies tend to weaken, which benefits gold. Simultaneously, bond market yields decline, benefitting the non-yield-bearing precious metal. Consequently, any pauses in monetary easing or slower rate cuts can negatively impact the XAU/USD exchange rate.

Gold's reaction to monetary policy is clear; for example, it rallied after the U.S. personal consumption expenditures (PCE) index slowed to 0.1% month-over-month in November, but then dropped when the Federal Open Market Committee (FOMC) updated its forecasts. Therefore, the main challenges for gold in 2025 are likely to include rising real yields on Treasury bonds, an acceleration in the U.S. economy, and the resulting strengthening of the dollar.

This image is no longer relevant

The outcome will largely depend on the implementation of Donald Trump's policies. Fiscal stimulus and deregulation could boost U.S. GDP growth. However, when combined with anti-immigration policies and tariffs, inflation may also rise. This scenario could lead to a rally in the USD index and higher yields on U.S. bonds. Furthermore, if the conflict in Eastern Europe comes to an end, it could significantly impact the prospects for XAU/USD bulls.

From a technical perspective, the daily chart for gold shows a "Splash and Shelf" pattern based on a 1-2-3 structure. As long as prices remain below fair value and a combination of moving averages, the outlook for gold remains bearish. A decline in gold prices below support levels at $2,608 and $2,590 per ounce may warrant opening or increasing short positions.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

EUR/USD: Analysis and Forecast

The EUR/USD pair is attracting buyers today, breaking a three-day losing streak and attempting to build intraday momentum above the psychological 1.1300 level. This indicates a renewed interest from buyers

Irina Yanina 11:59 2025-05-02 UTC+2

U.S. Labor Market Data Could Be a Major Disappointment

Employment growth in the U.S. likely slowed in April, although the unemployment rate is expected to remain unchanged, pointing to healthy but moderate demand for labor. However, the Trump administration's

Jakub Novak 10:08 2025-05-02 UTC+2

The ECB Has No Other Choice

The European currency continues to lose ground against the U.S. dollar as traders increasingly place bets on the European Central Bank's upcoming monetary policy decisions. According to data, the chances

Jakub Novak 10:03 2025-05-02 UTC+2

China Has Finally Responded

The euro, the pound, and other risk assets reacted with gains following statements from Chinese authorities that they are assessing the possibility of trade negotiations with the United States—marking

Jakub Novak 09:57 2025-05-02 UTC+2

The Process Has Begun. China Is Ready for Trade Talks (There's a Chance of Renewed Decline in Gold and EUR/USD Prices)

Trading on the last day of the week is unfolding positively. News that China is ready to begin negotiations has inspired investors to buy risk assets and weakened the U.S

Pati Gani 09:43 2025-05-02 UTC+2

The Market Enters Turbulent Waters

The market is confident that tariffs won't materialize or that companies can pass them on to customers. The S&P 500's eight-day rally—its longest since August—strongly hints at this. So does

Marek Petkovich 09:24 2025-05-02 UTC+2

What to Pay Attention to on May 2? A Breakdown of Fundamental Events for Beginners

Only a few macroeconomic events are scheduled for Friday, but some are quite significant. Naturally, the focus is on the U.S. NonFarm Payrolls and unemployment rate, yet it's also important

Paolo Greco 09:14 2025-05-02 UTC+2

GBP/USD Overview – May 2: The U.S. Dollar Didn't Rise for Long

On Thursday, the GBP/USD currency pair continued to decline. The dollar had strengthened for three consecutive days—despite having no objective reason. U.S. macroeconomic data has been consistently weak; there were

Paolo Greco 03:50 2025-05-02 UTC+2

EUR/USD Overview – May 2: The Dollar Faces a New Collapse – And It's Far from the Last

On Thursday, the EUR/USD currency pair once again traded relatively calmly, but the U.S. dollar failed to show any meaningful growth this time. A little bit of good news goes

Paolo Greco 03:47 2025-05-02 UTC+2

USD/JPY: A Rough Patch for the Yen

At its latest meeting, the Bank of Japan kept all key policy settings unchanged, effectively implementing the most expected baseline scenario—despite earlier conflicting statements from central bank officials

Irina Manzenko 01:19 2025-05-02 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.