Trade wars may slow the global economy and spur inflation, creating a favorable environment for gold. Against this backdrop, central banks purchase more gold, and retail investors are increasingly pouring their capital into gold ETFs. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Global GDP is expected to slow, and inflation is expected to accelerate.
- Markets are shifting from the Trump put to the Fed put.
- Falling real Treasury yields create a perfect backdrop for the XAUUSD.
- Bullish targets for gold are $3,046 and $3,105.
Weekly Fundamental Forecast for Gold
Following several years of robust global economic growth fueled by the US economy, investors are bracing for hard times. President Donald Trump’s plans to reshape the international trade system will bring nothing but short-term yet acute pain for the global economy. The OECD anticipates a slowdown in the global economy and an acceleration in inflation, creating a favorable environment for gold.
OECD Inflation Forecasts
Source: Bloomberg.
Commerzbank notes that the precious metal has begun to resume its uptrend against the backdrop of slowing inflation in the US. This has increased the likelihood of the Fed’s monetary expansion cycle resuming soon. The futures market estimates its scope at 70 bps in 2025, and if the updated FOMC forecasts confirm this, the US dollar will weaken further, and XAUUSD quotes will rise.
At the same time, tariffs will likely spur inflation. However, gold is immune to this factor. It is sensitive to real yields, while nominal rates remain subdued due to recession fears. As a result, the precious metal’s rally has a solid foundation.
Gold Performance and 10-Year Real Treasury Yield
Source: Bloomberg.
Banks and investment firms are revising their forecasts upwards. ANZ expects gold at $3,100 and $3,200 per ounce in 3 and 6 months. Goldman Sachs warns that its estimate of $3,100 by the end of the year is underestimated. UBS Global Wealth Management believes that the precious metal will trade at an average price of $3,200 over the next four quarters, as the markets have abandoned expectations of a Trump put and are demanding one from the Fed.
The shift from the Trump put to the Fed put is a tailwind for the XAUUSD. Instead of fiscal stimulus, investors are waiting for monetary stimulus, which will weaken the US dollar and drag US Treasury yields down. This is a perfect bullish setup for gold! That’s why inflows into gold ETFs look like nothing out of the ordinary.
Capital Inflows into Gold ETFs
Source: Bloomberg.
Thus, Donald Trump’s plans to restructure the international trade system will come with a slowdown of the global economy and an acceleration of global inflation. Meanwhile, gold will continue to shine in the financial markets. Demand from retail investors for ETFs, central banks for bullion, and speculators for futures is off the charts, pushing XAUUSD quotes higher.
Geopolitical factors, particularly the end of the armed conflict in Ukraine, could hamper the precious metal’s surge. However, Russia has yet to give a definitive response, and Israeli attacks on Gaza are adding to geopolitical uncertainty.
Weekly Trading Plan for Gold
Long positions formed at $2,930 per ounce can be kept open, with the targets at $3,046 and $3,105.
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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