The Golden Future of XAUUSD in 2025

Gold is a unique asset in global finance, valued both as a commodity and a financial instrument. With 2500 years of history as a reliable store of value, it serves as a “safe haven” during economic turbulence, inflation, and geopolitical instability.

Unlike fiat currencies, gold’s limited supply helps it retain intrinsic value, establishing its reputation as a hedge against inflation and currency devaluation. This makes it an essential asset for portfolios seeking stability amid market fluctuations.

In this first part of our forecast series for 2025, we will analyze XAUUSD, given its pretty appealing aura for traders due to its record performance throughout 2024. 

Historical gold price drivers

There are various key determinants behind XAUUSD price dynamics. All of them can be subdivided into 3 main categories:

1. Gold supply and demand

Gold supply is limited by difficult and costly extraction processes, with new deposits becoming harder to find. Coupled with rising demand, production has stabilized in recent years, and experts predict that by the year 2050 extracting new gold may become uneconomical.

Historically, a large portion of mined gold is tied up in jewelry, further limiting the available supply for trade, which could drive prices higher.

In general, slowly shrinking supply and rapidly growing demand favor gold prices to the upside.

2. Value of the US dollar

The value of the USD significantly influences gold prices. Although gold is quoted worldwide, it is primarily priced in dollars, meaning fluctuations in the US dollar’s value directly impact gold’s cost. When the dollar weakens, gold prices tend to rise because it becomes more expensive in dollar terms. This effect occurs as a weaker dollar reduces purchasing power, leading investors to seek gold as a stable alternative.

3. Broader geopolitical and economic stability

In times of geopolitical tension or economic instability, like the ongoing Russia-Ukraine war or Middle East clashes, investors often seek safe-haven assets. While geopolitical events can drive demand for gold, their effect on gold pricing is usually less pronounced over time than domestic economic conditions, such as interest rates or inflation.

On the other hand, economic stability and healthy growth help maintain confidence in the leading role of the US dollar, while also boosting the appeal of riskier assets like stocks or cryptocurrencies.

For instance, the strongest XAUUSD rallies happened at the end of the 1970s, in the timespan (2000-2011) between the 2001 Dot.com bubble and the aftermath of the 2008 financial crisis, during the Covid pandemic (2020), and, more recently, after Russia’s invasion of Ukraine (February 2022 – today).

All four of these rallies established new all-time highs, each due to a perfect mix of USD weakness, economic uncertainty, and rising geopolitical tensions.

Analysis of XAUUSD 2024 dynamics

2024 has been a record year for gold. Starting at $2,062/oz on January 2, the metal repeatedly overwrote its ATH during the year, peaking at $2,790 on October 30. This marked an impressive 35% return over 10 months.

Based on World Gold Council’s Q3 2024 data, supply increased 5% y/y, with mine production hitting an all-time third-quarter high and recycling rising 11% y/y. The effects of growing supply were offset by rising total demand, also 5% y/y. Moreover, the gross value of demand jumped 35% y/y, exceeding $100 billion for the first time in history.

The rise in prices was fueled also by rising central banks’ demand. Monetary authorities worldwide bought more gold in the first two quarters of 2024 than in the last 10 years, boosting its upside momentum. In Q3, however, their buying pressure decreased.

Adding to that, in Q3 2024 golden ETFs registered the first positive inflows since Q1 2022.

Geopolitics continued playing a key role throughout the year (mainly in the first half), as the flames of war in the Middle East continued burning and the Russian-Ukrainian conflict carried on without many changes.

From July, however, attention shifted to worsening conditions of the US labor market and the consequent Fed’s rate cuts, with XAUUSD gaining 18% throughout the month.

Even though the USD began to strengthen at a very rapid pace at the beginning of October, gold continued its rise to new all-time highs. Then, the US elections unfolded, and following Trump’s promises to end wars and boost growth, the trend changed. Traders began unwinding recession and geopolitical risk hedges, and XAUUSD tumbled 8% in the first half of November.

What awaits XAUUSD in 2025

Trump’s election might shift the dynamic of gold prices in the medium term but is unlikely to keep them from rising in the long term.

Even if markets now expect global tensions to cool, no one has ever said anything about the Israeli-Palestinian conflict. In fact, Trump repeatedly backed the former throughout his first term as US president and firmly positioned himself as a pro-Israel politician. A confirmation of that is Iranian President Masoud Pezeshkian’s quote, that Trump’s victory “makes no difference” to the Islamic Republic.

Most solid gold drivers are primarily economical, and not political, so in 2025, XAUUSD is likely to rely more on the trajectory of the US and China’s economy and relations, while also keeping an eye on the geopolitical landscape. 

As stated before, global supply will slowly shrink, with gold recycling destined to take the leading role in mining’s stead. Meanwhile, demand is to rise strongly, especially in Asia, both on the industrial and investment side.

Central banks are unlikely to slow their pace of gold-buying, because, since the beginning of the Russian-Ukrainian conflict, major political equilibriums have been recalibrated and a US-China trade war looms on the horizon.

Besides, as the de-dollarization trend begins to be fully visible since the freezing of Russian foreign reserves, non-western central banks’ purchases are only expected to increase.

Furthermore, China’s data is yet to give positive signals of a recovering economy, after unprecedented stimulus measures were announced earlier in October 2024. 

Meanwhile, Trump’s policies are pretty pro-inflationary, which in the medium term could push the Fed to raise the rates once again, strengthening the US dollar. Even if the negative correlation between gold and the Fed rate isn’t a historically provable dynamic, XAUUSD could still experience some pronounced downside.

XAUUSD in 2025: Possible Scenarios

For all the reasons above, in 2025 we expect the realization of one of the following scenarios. 

1. Trump manages to cool down global escalation – global economic conditions stabilize

Highly unlikely, especially given the mid-November escalation, caused by the US and EU’s government allowance for Ukraine to use long-range missiles against Russia. In any case, it is still a possible scenario. 

In case of a truce between Russia and Ukraine or a somewhat peaceful settlement of the Israeli-Palestinian conflict, gold is to take a tough blow. Coupled with a stronger US economy, lifted by the republican president’s new policies, and the Fed possibly deciding in favor of higher rates, XAUUSD could plummet as low as $2,200 – $2,000/oz.

At the same time, the effects of the trade war will ripple across global markets and could offset some of gold’s negative dynamics.

Technically speaking, the $2,200 – $2,000/oz. is a pretty interesting level, as on the Weekly chart there lies the Fibonacci 0.5 – 0.618 reversal golden zone.

Since 2001, Fibonacci retracements have been a recurring fact, often providing entry points after the exhaustion of major economically or politically-driven bullish trends.

2. Trump doesn’t manage to freeze wars, trade war escalates, but the US economy is still strong

In this scenario, Trump succeeds neither on the Russo-Ukrainian front nor in the Middle East. The rhetoric of “ending all wars” sounds certainly appealing, but means nothing if both sides don’t find any common ground to agree on. And apparently, there’s nothing to talk about yet.

“Proposals to freeze the conflict in Ukraine along the line of contact are essentially the same as the Minsk agreements in new packaging; actually worse,” said Russian foreign minister Sergey Lavrov, when commenting on election results. Similar comments were heard from the Iranian side.

At the same time, Trump’s willingness to increase tariffs on Chinese imports could result in a spiraling trade war, with both the US and China exchanging blows to cripple each other’s economic potential. The US support for Taiwan also is likely to continue, which can only increase tensions between the two.

As soon as markets grasp that Trump is unable to keep his ambitious promises, XAUUSD is to rise again very quickly, from wherever it would be positioned.

In this case, XAUUSD is likely to reach $3,000/oz. by the end of 2025.

3. Recession in the US, China fails to boost economic growth 

There are a lot of structural problems in the US economy.

The government’s heavy reliance on borrowing to artificially boost GDP is unsustainable. Debt-to-GDP levels today exceed World War II highs, hinting at a deep vulnerability. Trump may have plans to resolve this issue with the use of Bitcoin, but that’s another story.

Recent data highlights underperformance in job creation, particularly in critical sectors like manufacturing and professional services, which often signal recessionary pressures.

In addition, despite the beginning of a monetary easing cycle in September to support worsening labor market conditions, inflation seems to be back on track again. As a result, on November 14, Fed Chair Jerome Powell stated that further rate cuts might be unnecessary. 

However, while the Federal Reserve can control short-term rates, the bond market determines the yield curve, reflecting investor expectations of higher future rates and broader market distrust. What caused the USD to strengthen rapidly could also be a hint that inflation hasn’t been defeated, but the economy is still far from emerging from excessive cooling.

Another symptom that something is afoot is Berkshire Hathaway’s massive build-up of cash reserves. By realizing gains, Buffett has boosted Berkshire’s liquidity reserves to an all-time high. With $325 billion in cash, it now represents 28% of the company’s asset value — the highest since 1990. Why would the world’s most famous investor keep a third of his holdings uninvested, without generating revenue streams? Is he planning something big or bracing for the worst?

Regarding China, it’s worth noting that Chinese gold ETF’s inflows are pretty solid. In case China fails to stimulate its economy with the announced measures (which are, in fact, just a temporary solution to core economic problems), the Chinese people are very likely to continue their buying spree, in an attempt to safeguard their savings against a crumbling property market. Although China is one of the top 2 gold jewelry consumers, if a prolonged economic stagnation demand for this type of goods might linger, in our view, investment buying is likely to offset this negative dynamic.

Gold might suffer short-term downside, like at the beginning of the 2008 crisis, but in the end, it’s going to continue its upward trajectory.

Considering how Trump is set about a trade war, its consequences could be dire for an already struggling Chinese economy. Ultimately, this would result in an even larger gold demand by Chinese and Asian investors.

If this scenario is to unravel, XAUUSD could not only shatter its current ATH but go even higher. On average, gold has outperformed the S&P during six out of eight of the last recessions, rising by +28% on average.

This could mean a price target of $3,400/oz. from the current $2,700/oz. circa.

Conclusion: XAUUSD forecast

To sum up, however significant, recent political shifts and changing world equilibriums are very unlikely to stop the historical rise of the yellow metal, which is primarily driven by supply and demand dynamics and investors’ hedge appetite.

In 2025, Gold’s trajectory might be subjected to political volatility, as the two-year-long rally might have come to an end in hopes of broader peace and stability.

However, in a world with evermore battered geopolitical relations and de-dollarization trends, XAUUSD is confidently set for an upward trajectory, despite any of these possible retracements and short-time uncertainty.

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