Gold Is Walking a Tightrope. Forecast as of 01.08.2025
The stability of the US economy, the Fed’s reluctance to cut rates, and cooling demand for physical metal are creating headwinds for gold. As a result, the precious metal may fall below the $3,250–$3,400 range. A shift in employment data may act as the key trigger for this move. Let’s explore this topic and make a trading plan for the XAUUSD.
The article covers the following subjects:
Major Takeaways
- Central banks’ demand for bullion is waning.
- ETFs are not as attractive as they used to be.
- The Fed’s willingness to lower rates hurts gold.
- Consider short trades if gold drops below $3,275.
Fundamental Forecast for Gold for Today
Markets move in cycles. As prices rise, demand typically weakens, prompting sell-offs. At the same time, supply tends to grow, giving bears the upper hand. Eventually, when prices hit a low, bulls re-enter the market and drive a new uptrend. After reaching a record high of over $3,500 per ounce, gold is now facing a sobering reality: investor interest is fading. Thus, the decline in the XAUUSD pair is hardly unexpected.
According to the WGC, demand for gold grew by 3% in Q2, while supply rose by 6%. Central banks bought 166 tonnes, compared with 249 tonnes in January-March. Capital inflows into ETFs slowed from 226.6 tonnes to 170 tonnes. Jewellery sales fell to 341 tonnes, marking the weakest level since Q3 2020, when demand was depressed by the COVID-19 pandemic.
Central Banks’ Gold Purchases
Source: Bloomberg.
Interest in physical gold declined in Q2 and continues to fall in Q3. Capital outflows from the four largest Chinese ETFs amounted to $450 million in July. Amid the truce in the trade war between the US and China, money shifted to the stock market, fuelled by a rally in stock indices.
Gold and the Chinese Stock Index Trends
Source: Bloomberg.
The primary factors contributing to the consolidation of the XAUUSD pair from April to July were elevated prices, weakening demand, and capital outflows. However, it was not only stocks that were affected. The Fed’s decision not to cut rates has increased the appeal of US Treasury bonds, while gold’s prolonged oversold condition has prompted investors to switch to less expensive alternatives such as platinum and silver. The decline in the latter allows gold to remain at the lower boundary of the trading range between $3,250 and $3,400. The question is how long it can hold?
According to Fidelity International, gold could reach $4,000 by 2026, driven by continued strong demand from central banks, an eventual slowdown in the US economy due to tariffs, and a likely shift toward rate cuts by the Fed. Goldman Sachs offers a similar forecast, also targeting $4,000 per ounce. While such a scenario is certainly possible in the long term, for now, the precious metal is contending with an entirely different set of headwinds.
The Fed has no desire to return to monetary easing, and the US economy is showing no signs of weakness. Meanwhile, central banks’ demand for gold appears to be waning. Against this backdrop, the chances of a pullback within the broader uptrend in the XAUUSD pair are increasing.
Trading Plan for Gold for Today
The upcoming US labor market report for July could further pressure gold prices. If employment and unemployment figures come in as expected, the risk of a deeper decline in XAUUSD will increase. If the price consolidates below the $3,275 level, short trades can be opened. A false breakout cannot be ruled out. In this case, wait for the price to start falling again after a slight increase.
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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