Gold Leaves Other Safe Havens Behind. Forecast as of 22.05.2025
Eroding confidence in the US dollar and Treasury yields, driven by the US policy shifts, has worked in gold’s favor, reinforcing its role as a safe-haven asset. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Gold is the best safe-haven asset.
- The XAUUSD pair is rising amid expectations of stagflation in the US.
- Fiscal problems boost the precious metal.
- Consider trading in the range of $3,100-$3,400.
Monthly Fundamental Forecast for Gold
When there is no crisis, gold gets the cold shoulder, but the moment trouble brews, demand for it surges. In 2025, the precious metal is acting as a classic safe-haven asset, tumbling after an unexpected truce in the US-China trade dispute, then spiking after Moody’s downgraded the US credit rating. These fluctuations highlight the absence of competition among reliable assets since the US dollar and Treasuries no longer seem like safe havens to investors.
On paper, the XAUUSD rally can be attributed to escalating geopolitical tensions in the Middle East, Russia’s reluctance to end the armed conflict in Ukraine, and a surge in Chinese gold imports, which reached an 11-month high of 127.5 tonnes in April. However, the underlying issues may be more complex.
Spot Gold and Chinese Gold Imports
Source: Bloomberg.
Investors are concerned about a potential stagflation in the US economy, marked by slowing GDP growth and rising consumer prices due to tariffs. Gold, often used as a hedge against inflation, typically sees increased demand during economic downturns. Consequently, XAUUSD prices have plunged as the trade conflict between the US and China has eased, leading to a reduced likelihood of recession.
The favorable environment for precious metals is strengthened by waning confidence in the US dollar, largely due to Donald Trump’s protectionist policies. Trump acknowledges that tariffs are damaging the US economy and plans to mitigate this through monetary and fiscal stimulus. This explains the calls for the Fed to lower the federal funds rate and his criticism of Jerome Powell.
At the same time, the US President is urging Republicans to advance a large tax cut bill through Congress. However, the scale of this bill is raising concerns in the market about a potential surge in inflation, which is contributing to rising US Treasury bonds. Additionally, worries about increased borrowing costs and a decline in foreign demand for Treasuries amid ongoing trade wars are driving investors toward safer assets, which in turn is bolstering the XAUUSD pair.
US fiscal woes have provided fresh momentum for gold. Whether the rally resumes or stalls in consolidation now depends on the outcome of the President’s bill in Congress. If the bill passes, reduced uncertainty could put downward pressure on the metal. But if it fails, rising political risk may push the XAUUSD pair higher.
Monthly Trading Plan for Gold
All these fears seem exaggerated. Thus, stick to the previous strategy, implying opening short trades at the upper boundary of the consolidation range of $3,100–$3,400 and long positions at the lower boundary.
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 broker. 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 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
