Despite the sell-offs in November, XAUUSD bulls remain optimistic, still hoping to see the gold price at $3,000 per ounce. However, they acknowledge that the near future may present challenges for the precious metal. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Gold managed to recover thanks to geopolitical factors and central banks.
- A Fed rate cut, de-dollarization, and uncertainty will support the XAUUSD.
- A strong dollar puts pressure on the precious metal.
- Gold may perform a pullback if it falls below $2,645 per ounce.
Weekly Fundamental Forecast for Gold
As the price of gold slightly increased, bulls began to return to the market. Bank of America and Citi suggest that the upward trajectory in the XAUUSD is intact and anticipate a price surge to $3,000 by 2025. Other major financial institutions, including JP Morgan and Macquarie, have expressed similar views. Not all investors have fled the market following the decline in November, but a positive outlook is necessary to enter the market at this time. The precious metal is likely to face significant challenges in the near future.
The increase in the price of gold towards $2,680 per ounce is driven by a combination of geopolitical factors and the actions of central banks. The overthrow of Bashar al-Assad’s government in Syria has introduced another potential flashpoint in the Middle East, leading to a surge in demand for safe-haven assets. The decision by Canada, Switzerland, and the eurozone to ease monetary policy in response to rate cuts in New Zealand is undermining the position of fiat currencies. Speculators are actively selling these currencies, leading to a capital spillover from the currency market to the precious metals market.
Speculative Positions on Major World Currencies
Source: Bloomberg.
In November, the People’s Bank of China made a strategic move to bolster its gold reserves by purchasing 5 tons of the precious metal for the first time in six months. This purchase has brought the bank’s total gold reserves to 2,269 tons. Despite the extended period of inactivity, the PBoC has purchased 34 tons since the beginning of the year, maintaining its position among major financial regulators that have demonstrated a preference for precious metals.
Citi analysts believe that as the US labor market deteriorates and demand for the ETFs increases, the XAUUSD will resume its uptrend and hit $2,800 on a three-month horizon and $3,000 on a six-to-twelve-month horizon. Long-term factors such as the de-dollarization process and the high level of US government debt will continue to support the precious metal. Despite the slowdown in the Fed’s monetary expansion, Bank of America believes that gold will continue to benefit from geopolitical and economic uncertainty.
Macquarie anticipates an average price of $2,650 for the precious metal in the first quarter, attributing this estimate to the negative impact of the US dollar. Nonetheless, XAUUSD bulls will regain ground, capitalizing on the Fed’s rate cut to 4%.
Most likely, gold will face significant challenges over the next three to four months. Donald Trump’s protectionist policies and pro-inflationary fiscal stance will prompt investors to expect a pause in the Fed’s monetary expansion cycle, which will strengthen the US dollar. However, Donald Trump should be officially inaugurated before this can occur, and the precious metal may post unexpected gains until that time.
Weekly Trading Plan for Gold
Nevertheless, the XAUUSD cannot continue the rally and restore the uptrend, pointing to fading bullish momentum. Against this backdrop, short trades can be considered on a pullback from the resistance levels of $2,680 and $2,715 or on a drop below the support level of $2,645 per ounce. Notably, short positions should be opened against the backdrop of accelerating US inflation in November.
Price chart of XAUUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
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