XAUUSD: Gold is making new highs!Gold is above the EMA200 and EMA50 on the 1-hour timeframe and is in its ascending channel. A downward correction of gold towards the demand ranges will provide us with the next buying opportunity with a good risk-reward ratio. We expect a fluctuation of $10-15 in each range.
• Revised Year-End Outlook: The bank attributes the bullish outlook to increased central bank purchases, inflows into gold ETFs, and continued geopolitical and macroeconomic uncertainty.
• Risk Scenario: Should the Fed shift course due to concerns over U.S. debt or weakening confidence in the dollar as a reserve currency, gold could climb to $4,500 per ounce.
One of the major forces behind this rally has been the weakening U.S. dollar under the Trump administration. Market participants are voicing three primary concerns fueling this sentiment: subpar U.S. economic growth, elevated inflation, and declining productivity. These fears stem from several core issues:
1. Tariffs: While intended to support domestic industry, tariffs are increasingly viewed as disruptive, raising fears of inflationary shocks and fragile supply chains—lessons painfully learned during the COVID era.
2. Economic Growth: Trump’s original growth agenda, centered on tax cuts and deregulation, has been overshadowed by other political developments. Many economists are uneasy about a government that seems willing to defy conventional economic principles—raising fears of repeating the failures of protectionist policies.
3. Budget Deficits: The U.S. is running a staggering 7% budget deficit relative to GDP despite low unemployment (~4%). This raises questions about how Trump’s proposed policies would be funded.
4. Erosion of International Norms: The U.S. dollar’s dominance relies on institutions like NATO, the WTO, and the United Nations, as well as global faith in the rule of law. These foundations are reportedly weakening. There are also emerging concerns from places like Beijing, pointing to American vulnerabilities—especially around intellectual property. In a world where IP rights are no longer respected, what value do American corporations really have?
5. Immigration: It remains unclear how much of Trump’s crackdown on illegal immigration is substantive versus symbolic. What is clear, however, is that undocumented migrants have played a crucial role in suppressing inflation in key sectors like agriculture and hospitality. Without a clear plan to replace this workforce, cost pressures could intensify.
