Gold News: XAU/USD Hits Record High on Fed Cut Bets and Dollar Weakness

XAU/USD Breaks $3,200 as Dollar Drops and Trade War Escalates

Gold prices surged above $3,200 on Friday, marking a new record and extending the metal’s 2025 rally. The breakout reflects a flight to safety driven by rising geopolitical risk, accelerating dedollarization, and rare pressure on both U.S. Treasuries and equities. With global uncertainty mounting, gold’s role as a store of value has reasserted itself forcefully.

Trade War Tensions Drive Safe-Haven Demand

The immediate trigger was a sharp escalation in U.S.-China trade tensions. China raised tariffs on U.S. imports to 125%, countering Washington’s combined 145% levy—made up of 125% retaliatory tariffs plus a 20% fentanyl-linked penalty. The intensity of the standoff has sparked capital flight from risk assets. As WisdomTree’s Nitesh Shah put it, gold is “the favoured safe-haven asset in a world upended by Trump’s trade war.”

Dollar Weakness Accelerates Gold Rally

The ICE U.S. Dollar Index fell 0.9% to 99.95—its lowest since 2022—extending its year-to-date decline to nearly 8%. A weaker dollar supports gold on two fronts: by lowering its cost for foreign buyers and by signaling broader concerns about U.S. economic leadership. Bannockburn’s Marc Chandler compared the erosion in confidence to the post-gold standard crisis of 1971, underscoring the depth of the shift.

Bond Market Sends Troubling Signal

U.S. Treasuries also came under pressure, with 10-year yields rising 50 basis points to 4.49% and 30-year yields jumping 48 basis points to 4.87%—their largest weekly gains in decades. This rare combination of rising yields and a falling dollar suggests a deeper investor re-evaluation of U.S. assets. Deutsche Bank’s George Saravelos pointed to “rapid dedollarization” as central banks and institutions look for alternatives.

Fed Cut Expectations Add to Bullish Case

While March producer prices declined 0.4%, traders expect tariffs to push inflation higher in coming months. Markets are now pricing in 90 basis points of Fed rate cuts by year-end 2025. Lower rates typically support gold, and with inflation risk rising, the non-yielding metal continues to attract defensive capital.

ETF Inflows and Central Bank Buying Reinforce Trend

Institutional flows are also amplifying the rally. Gold-backed ETFs have seen renewed inflows, and central banks—particularly in emerging markets—are increasing gold reserves to reduce reliance on the dollar. These long-term reallocations point to sustained demand beyond short-term speculation.

Gold Prices Projections: Bullish Trend Remains in Focus

With gold holding above $3,200, the near-term outlook remains bullish. Unless trade tensions ease or U.S. economic data improves meaningfully, core drivers—including dollar weakness, institutional demand, and dovish Fed expectations—are likely to keep gold supported. A minor pullback is possible after the sharp run-up, but the broader trend continues to favor higher gold prices heading into Q2.

More Information in our Economic Calendar.