Gold was on the brink of a collapse, fearing that the Fed would keep the federal funds rate unchanged in December. However, FOMC doves have managed to keep the topic of monetary policy easing alive. Let’s discuss this topic and make a trading plan for the XAU/USD.
The article covers the following subjects:
Major Takeaways
- Gold receives support from increased chances of a Fed rate hike.
- A strong dollar creates challenges for the precious metal.
- Geopolitical factors put pressure on XAU/USD quotes.
- Short and long trades can be opened at $4,200 and $4,000, respectively.
Weekly Fundamental Forecast for Gold
As a rule, gold surges when the US economy is weak, and the Fed cuts interest rates. When the US regulator keeps the rate unchanged, and the US economy is strong, the precious metal seeks other growth drivers. At the end of autumn, it found itself on a thorny path. Although the US GDP is in good shape, the Fed will likely ease monetary policy. As a result, the XAU/USD is facing increased volatility.
The minutes of the October FOMC meeting nearly sent gold into a tailspin. The precious metal almost fell below $4,000 per ounce, which would have caused a precipitous decline. In this regard, the XAU/USD is similar to the BTC/USD. Both assets had grown so much over such a long period that investors were unprepared for a major correction. Bitcoin was caught off guard, but gold managed to avoid it. However, the sell-off of US stocks seriously rattled its stability. As a rule, investors sell assets to maintain their margin requirements.
Bitcoin Rate vs. Nasdaq 100 Performance
Source: Bloomberg.
New York Fed President John Williams hinted at lowering the federal funds rate in December. His speech was echoed by other doves — Christopher Waller and Mary Daly. As a result, the chances of monetary policy easing at the end of 2025 soared from less than 30% to 81%. Against this backdrop, Treasury bond yields dropped, the US dollar remained resilient, and the precious metal surged but eventually retreated.
If the federal funds rate is trimmed in December, it is unlikely to be lowered again in January. As a result, the XAU/USD is unlikely to fall and recover; instead, it will likely surge, allowing traders to open short trades on the rise.
Market Expectations for Fed Funds Rate
Source: Nordea Markets.
At the same time, the gold price is driven by a variety of factors. According to the Atlanta Fed’s leading indicator, US GDP will grow by an impressive 4.2% in the third quarter. Gold is a safe-haven asset, so economic growth is not good news for it. Neither is the growing likelihood that the Ukraine conflict will end.
The armed conflict in Eastern Europe has prompted central banks to step up their gold purchases. Some of them disclosed all the data, while others concealed it. Officially, China has been buying gold for 12 consecutive months, bringing its reserves to 2,304 tons. According to JBMA estimates, the actual figure is closer to 5,000 tons. Société Générale’s analysis indicates that since 2022, the figure has increased by 1,080 tons.
Weekly Trading Plan for XAUUSD
Central banks will likely stop aggressively buying gold if the Ukraine conflict ends, and Washington and Beijing sign a trade truce. Gold may consolidate in the $4,000–$4,200 range amid reduced geopolitical risks, the strength of the US economy, and the increased likelihood of a Fed rate hike. Short positions can be considered near the upper boundary of the range, while long positions can be opened near 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
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