Gold Follows Smart Money. Forecast as of 15.05.2025
Hedge funds and asset managers have been selling gold for seven consecutive weeks, despite the XAUUSD reaching record highs. This was driven by US tariff policies and fears of an impending recession. Let’s discuss these topics and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Speculators were selling gold as its price rose.
- Increased global risk appetite is putting pressure on XAUUSD quotes.
- The precious metal is suffering from the Fed’s reluctance to cut rates.
- Short trades formed at the upper boundary of the $3,100–$3,400 range can be kept open.
Weekly Fundamental Forecast for Gold
Follow the smart money. This strategy has not been as successful in the US stock market, where retail investors own 38% of shares and helped boost the S&P 500 index after the April slump. For an extended period, the strategy proved ineffective in the gold market, where hedge funds and asset managers reduced their net long positions for seven consecutive weeks, despite the rally in the XAUUSD. However, the market reached a turning point in May, and bulls faced significant challenges. The crowd is fleeing amid the de-escalation of trade conflicts and the unwillingness of the US economy to slide into recession.
ETF Holdings and Speculative Positions on Gold
Source: Bloomberg.
The gold rally in 2025 was based on bets that the highest tariffs since the early 20th century would cripple the US economy and force the Fed to throw it a lifeline in the form of large-scale monetary stimulus. The precious metal hit a record high in late April when the US administration imposed 145% tariffs on China, which responded with 125%, effectively imposing a trade embargo on the two countries, while US GDP contracted in the first quarter.
However, Washington and Beijing agreed to a 90-day truce, under which tariffs will be reduced to 10–30%, reducing the risk of a recession in the US economy. The latter’s stability allows the Fed to keep rates high, spurring Treasury yields and putting pressure on the XAUUSD.
In April, the derivatives market gave a 92% probability of monetary policy easing in July; the chances have now fallen to 37%. The market is counting on the Fed to resume its monetary expansion cycle in September. Without a deterioration in macroeconomic statistics, their expectations will not change, limiting gold’s upside potential.
Investors are getting rid of the precious metal due to a growing global risk appetite, which reduces demand for safe-haven assets. The fact that investors are no longer afraid of the US administration’s frequently changing policies is evidenced by the simultaneous rally in Treasury bond yields and the S&P 500 index. The broad stock index and Treasuries have recently been following the same trajectory, signaling a shift in the market from greed to fear and back again.
S&P 500 Index Performance and 2-Year US Treasury Yield
Source: Bloomberg.
Notably, Chinese traders have closed their positions due to the agreement between Washington and Beijing. In April, gold prices in China experienced a significant increase in yuan terms, and demand for ETFs surged due to the ongoing trade tensions. In May, investor demand will likely wane.
Weekly Trading Plan for Gold
The assumption that gold would consolidate in the range of $3,100–$3,400 per ounce was accurate, and short trades formed near the upper boundary were a sound strategy. These trades can be kept open until the precious metal tests the lower boundary of the range. Notably, gold may pierce the support level of $3,100.
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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