As a rule, gold may face a short-lived sell-off during periods of stock market turbulence. The precious metal offers an opportunity to obtain rapid liquidity to maintain margin requirements on stocks. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The collapse of NVIDIA and the S&P 500 triggered a sell-off in gold.
- Postponed tariffs are a positive factor for the XAUUSD.
- The Fed will determine the trajectory of the precious metal and the US dollar.
- Pullbacks to $2,705–$2,715 and $2,670–$2,680 may create an opportunity to buy gold.
Weekly Fundamental Forecast for Gold
Historically, gold prices tend to decline in response to significant drops in stock indices. This was evident during Black Monday on August 5 and on January 27, when NVIDIA’s competitor from China unveiled a product comparable to OpenAI’s GPT-4. This development cast doubt on the prevailing notion of American superiority in the field of AI solutions, evoking comparisons to the Soviet satellite launch before the United States.
During significant sell-offs in the US equity market, gold is often utilized to generate cash quickly to avoid margin calls on stocks. Over an extended investment time frame, its correlation with stock indices is less pronounced compared to other assets, such as the US dollar. Last week was the worst one for the US dollar in 14 months. Against this backdrop, XAUUSD bulls managed to push gold to record highs.
US Dollar Weekly Performance
Source: Bloomberg.
Since Donald Trump’s inauguration, investors have become assured that they should trust the US president’s actions, not words. The 25% tariffs against Canada and Mexico, which were promised from the first day in office, have been postponed until February 1. This day will reveal whether the president’s threats are more dangerous than his actions. This is particularly notable given that social media posts appear to contradict the White House’s instructions to its team to prepare documents for potential import duties by April 1.
As expected, the diminished severity of tariff threats has prompted asset managers and hedge funds to reduce their record-high net long positions in the US currency since 2017, creating a tailwind for gold. However, the decline in US stock indices prevented the precious metal from reaching a new all-time high.
Speculative Positions on US Dollar
Source: Bloomberg.
Experts at the London Bullion Market Association (LBMA) believe that gold will likely reach new record highs in 2025. The most bullish and bearish scenarios suggest $3,290 and $2,250 per ounce, respectively. This reflects a 30% increase from the 2024 estimate, indicating heightened volatility in the market. At the same time, the estimated average price range is projected between $2,500 and $2,950.
The future of the US dollar and gold hinges on the Fed’s next moves, and while Donald Trump will not be able to dictate Jerome Powell’s policies, the pressure will be significant. Blanket trade barriers could spur inflation, increasing the likelihood of a prolonged Fed pause and strengthening the greenback. The White House’s reluctance to impose these tariffs is beneficial for the XAUUSD.
Weekly Trading Plan for Gold
Given the low probability of an imminent resolution to the armed conflict in Eastern Europe, which has provided a safety cushion for gold, one may consider buying the precious metal on pullbacks to $2,705–$2,715 and $2,670–$2,680 per ounce.
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
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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