Rumors about a Fed pause in December have triggered a pullback in the S&P 500 index. As a rule, investors often sell gold to meet margin requirements on stocks. Let’s discuss this topic and make a trading plan for the XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold slipped against the Fed’s cautious stance.
- The Fed may cut interest rates in January rather than in December.
- Central banks continue to purchase gold.
- Short trades on gold can be opened on a decline below $4,000 and $3,920.
Weekly Fundamental Forecast for Gold
After sagging amid the flight of speculators in October, gold made a titanic effort in November to continue its upward trend. However, bulls were forced to retreat amid a decline in the likelihood of a federal funds rate cut in December, which fell to 48%. At one point, the indicator fell to 42%, allowing the dollar and US Treasury yields to surge. Against this backdrop, the precious metal looks extremely vulnerable.
More and more FOMC officials are saying that, in the absence of data, they would prefer to err on the side of caution. If there is an opportunity to ease monetary policy in January, what is the point of doing so in December? The BLS is set to release its September employment report on November 20, but this is a lagging indicator. The central bank is shedding some of its uncertainty, but not all of it. In such conditions, it is better to play it safe.
Performance of S&P 500 and Gold
Source: Trading Economics.
At the same time, lower odds of a Fed rate cut in 2025 are weighing on US stock indices. Their increased correlation with gold suggests that a pullback in the S&P 500 is spurring a correction in XAU/USD quotes. To meet margin requirements on stocks, investors often sell other assets. It would not be surprising if gold has now fallen victim to their selling spree.
Meanwhile, large banks are trying to find a silver lining in a dire situation. Goldman Sachs, which predicted that gold would skyrocket to $4,900 per ounce by 2026, continues to defend its forecast. According to the company’s estimates, central banks purchased 64 tons of bullion in September, which is three times more than in August. In addition, the People’s Bank of China reported buying 1.24 tons, but actually increased its reserves by 15 tons.
Goldman Sachs predicts that central banks will purchase an average of 80 tons per month in the fourth quarter, which should support prices. However, this assessment seems far-fetched. Tariff uncertainty has passed its peak and is likely to decline, unless it disappears completely by decision of the Supreme Court. In this case, the panic in the markets will be temporary.
In the first half of 2026, the US administration will likely resume putting pressure on the Fed to cut rates aggressively. Most likely, the FOMC will be reshuffled. If Donald Trump secures the majority led by dove Stephen Miran, the US dollar will be doomed, allowing gold prices to recover.
Weekly Trading Plan for XAUUSD
However, gold remains under pressure. The previously mentioned bubble burst and selling near swing highs strategies have proven effective. Short positions formed at $4,200 on the XAU/USD can be increased if the Fed delivers hawkish remarks in the minutes of the October meeting and strong employment statistics for September. Breakouts of the support levels of $4,000 and $3,920 per ounce will serve as sell signals.
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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