What factors have contributed to the 11% rally in the XAUUSD since the beginning of the year? Could these be shifts in a geopolitical landscape or Donald Trump’s tariffs? At the same time, was it due to central banks’ increased gold purchases, a resurgence of investor interest in ETFs, or another factor at play? Let’s discuss these topics and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US Treasury is planning to monetize the asset side of the US balance sheet.
- The White House is aiming to reduce Treasury bond yields.
- XAUUSD bulls are enjoying the current backdrop for gold.
- Gold can be purchased on a pullback to $2,895 and $2,875 per ounce.
Weekly Fundamental Forecast for Gold
Treasury Secretary Scott Bessent’s remarks regarding the monetization of the asset side of the US balance sheet, coupled with President Donald Trump’s expressed desire for lower yields on 10-year Treasury notes, have fueled speculation that revaluing gold reserves from the current $42 per ounce to market prices, followed by a repurchase agreement, could generate approximately $800–$900 billion and reduce bond issuance. This, in turn, could potentially boost the value of the XAUUSD.
In a similar vein, digital gold, represented by bitcoin, has been gaining traction amid speculation about Donald Trump’s potential plans for a strategic BTC reserve. Meanwhile, traditional gold has been experiencing an increase in value due to rumors of reserve revaluation.
While the concept may initially seem unconventional, significant tariffs on imports or the dismissal of government officials can have a substantial impact on financial markets. The US president has expressed ambitions to reshape the global landscape, a goal that requires substantial financial resources.
The implementation of his plans has led to a significant increase in demand for safe-haven assets, with the precious metal and the US dollar, previously viewed as atypical, showing notable growth.
Gold Price and US Dollar Index
Source: Bloomberg.
Reducing Treasury bond issuance will indeed drag yields lower. The Fed will not even need to cut the federal funds rate for this to occur. The US regulator has no intention of raising the rate, as it continues to view its monetary policy as constraining economic growth. These conditions are ideal for gold: accelerating inflation and a Fed pause. With such a combination, the real bond yields will fall. This is proven by the TIPS performance.
Gold Price and US Treasury Inflation Protected Notes (TIPS)
Source: Bloomberg.
In addition, the significant demand for gold in the US due to concerns that Donald Trump’s tariff policy will target it further reinforces the outlook for the XAUUSD. Citigroup forecasts gold prices to rise to $3,000 per ounce in the near term and to $3,150 by the end of 2025.
Bullish market conditions have led to a reversal of ETF flows. While holdings of gold-focused exchange-traded funds (ETFs) were previously declining, they have now increased for six of the past seven weeks.
Gold Price and ETF Holdings
Source: Bloomberg.
Therefore, the increased purchases by central banks as part of their efforts to diversify reserves and move away from the US dollar have been complemented by demand from ETF investors, contributing to the record-breaking highs seen in the XAUUSD. Since the beginning of the year, gold quotes have grown by 11%, and this trend shows no signs of slowing down.
Weekly Trading Plan for Gold
Gold bulls have easily pushed the price to the targets of $2,875 and $2,910 per ounce. Long positions can be opened on a pullback towards $2,895 and $2,875.
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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