The outcome of blackmail may differ significantly from what is initially anticipated. The prospect of new tariffs could potentially lead to the revival of de-dollarization processes, which would reinstate gold as a dominant investment vehicle. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Trump’s threats may revive de-dollarization.
- Geopolitical factors will continue to support the XAUUSD.
- The gold price depends on the Fed’s decisions.
- Short trades can be opened if gold falls below $2,620.
Weekly Fundamental Forecast for Gold
Gold prices have collapsed due to the Trump Trade. However, Trump’s trade policies may boost gold quotes. The threat of 100% tariffs against the BRICS countries seems designed to prevent a collapse of the US dollar-based monetary system. However, if the greenback is so mighty, and there is no possibility of replacing it, why are these angry speeches necessary? Are they doing more harm than good?
US Dollar Performance and Speculative Positions
Source: Bloomberg.
In 2024, gold has showcased a remarkable success story. Despite a significant headwind in November, its value has increased by 27.5% since the beginning of the year, largely due to the Fed’s monetary policy easing. However, the precious metal also appreciated between 2022 and 2023 despite the most aggressive increase in the federal funds rate in four decades. Between November 2022 and December 2023, XAUUSD quotes saw a 30% increase due to de-dollarization and the associated active purchases of gold by central banks, as well as strong demand from China.
Donald Trump’s return to power has undermined the concept that other countries will move away from the US dollar. The president-elect said that he could finish the military conflict in Ukraine in 24 hours, which would mark a significant shift in the perception of Russia on the global stage. Russia will no longer need to create alternative currencies for settlements. The appetite of central banks for gold is waning, leading to a decline in XAUUSD quotes. Furthermore, the Chinese economy is crippling, and the precious metal’s prices are above the threshold required to stimulate a surge in domestic demand.
The US dollar remains the dominant currency in the Forex market, with transactions exceeding 80% of their total volume. The USD index is soaring due to higher Treasury yields and expectations of a pause in the Fed’s monetary easing cycle in December or January. In addition, President Trump has proposed 100% tariffs on imports from the BRICS countries.
Share of US Dollar and Other Currencies in Forex Transactions
Source: Wall Street Journal.
Will President Trump’s recent statements lead to a renewed focus on the de-dollarization process? I do not anticipate a significant acceleration. Nevertheless, it is unlikely that he will bring the conflict in Ukraine to a swift conclusion, as previously indicated. Gold will continue to benefit from geopolitical factors, but in the medium term, the XAUUSD price will be driven by the traditional and historically tested driver: the Federal Reserve’s monetary policy.
Weekly Trading Plan for Gold
In light of Jerome Powell’s hawkish speech and the subsequent robust US labor market data for November, it may be advantageous to open short trades, adding them to the ones initiated on a breakout of the $2,620 support level. Should the Fed Chairman note that the cycle of monetary expansion should be continued, and US labor market data appear to be disappointing, the precious metal may surge to the upper boundary of the consolidation range of $2540–$2720.
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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