A Fed rate cut is great news for gold. However, this factor has already been reflected in gold prices. Meanwhile, Jerome Powell’s hawkish rhetoric may trigger a sell-off in the precious metal. Let’s discuss this topic and make a trading plan for the XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold and US stocks are moving in sync.
- Gold ETF stocks are hitting record highs.
- The Fed’s hawkish stance could drag XAU/USD quotes down.
- Gold can be sold if it returns to the $4,000–$4,200 range.
Weekly Fundamental Forecast for Gold
At the end of October, concerns about excessively high valuations and unprofitable investments in technology companies caused the S&P 500 index to plummet from its record highs. At the end of the year, it was gold’s turn to plummet. The Bank for International Settlements warned that for the first time in half a century, the precious metal was rising in line with stocks. The precious metal has entered a dangerous area, where the XAU/USD bubble may burst, as it did in 1980.
S&P 500 Performance and Gold Price
Source: Trading Economics.
The analogy with events from those years can hardly stand to be ignored. In 2025, gold gained 60%, posting the second-largest rally in its history. The first occurred in 1979, when it rose 140% amid unprecedented pressure from the US administration on the Fed to lower interest rates, which led to rampant inflation. In April, the XAU/USD rally began when institutional investors rushed to safe-haven assets amid the US imposing massive tariffs on Liberation Day.
Some assets are bought simply because they are growing. Seeing gold’s bullish momentum, retail investors and exchange-traded funds joined the rally. According to the World Gold Council, ETF holdings reached 3,932 tons at the end of November. Since the beginning of the year, they have grown by staggering 700 tons. At the same time, fears over tariffs have led to a surge in Forex trading volumes to historic highs. Traders sold the US dollar as part of currency risk hedging operations, which fueled the XAUUSD rally.
FX Trading Volume
Source: Bloomberg.
Indeed, the BIS has several reasons to remain concerned. Gold has soared too high, and the bubble could burst due to one of two reasons. The first scenario implies that a conflict in Ukraine ends, while Russia and the US reestablish their relations, slowing the processes of de-dollarization and diversification of gold and foreign exchange reserves. For example, the People’s Bank of China has been buying bullion for 13 months in a row. It has increased its reserves to 74.12 million ounces. In November, they grew by 30,000 ounces.
The second scenario suggests that the Fed’s easing cycle will gradually end. Monetary stimulus measures have reduced costs and increased liquidity, improved global risk appetite, and gradually turned gold from a safe haven into a yielding asset. The futures market is expecting a hawkish cut in December and has lowered its assumed scale of monetary expansion to two acts in 2026. As a result, the XAU/USD is facing downward pressure.
Weekly Trading Plan for XAUUSD
Jerome Powell’s hawkish rhetoric will likely push gold back into the $4,000–$4,200 range, allowing trades to open short positions. On the other hand, if Kevin Hassett becomes the new Fed chair, the easing cycle may gain traction, bringing investors back to the precious metal. In this case, short-term sales can be closed, and long trades can be opened on the XAU/USD.
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.
