Gold (XAU) Price Forecast: Will Fed Policy and Rate Cut Bets Fuel the Next Major Rally?

Gold Hits Record High as Trade Risks and Safe-Haven Demand Dominate

Gold reached a historic high of $3,005.04 this week as trade tensions, inflation data, and risk-off sentiment drove safe-haven buying. A sharp stock market sell-off early in the week pushed investors into cash and gold, reinforcing its role as a hedge against economic uncertainty. However, as equities rebounded on Friday, profit-taking trimmed gains, bringing gold slightly off its peak.

Despite the pullback, macro risks remain in focus, with the Federal Reserve’s upcoming meeting set to determine gold’s next move.

Last week, XAU/USD settled at $2984.91, up $75.36 or +2.59%.

Stock Market Volatility and Trade Uncertainty Drive Gold Buying

Gold’s rally was fueled by heightened concerns over U.S. trade policy. President Trump’s new tariff measures, particularly on Chinese imports, sparked fears of prolonged economic strain. Retaliatory tariffs from China and Canada added to market instability, sending equities lower and increasing demand for gold as a hedge.

The S&P 500 and Nasdaq saw deep losses earlier in the week, with $5 trillion erased from market value over three weeks. This risk-off move drove investors into gold, a trend reinforced by a Bank of America survey showing 52% of fund managers now view it as the best protection against a trade war.

Cooling Inflation Strengthens Rate Cut Bets

This week’s inflation reports supported expectations that the Fed may cut rates later this year. CPI data showed a 0.3% rise for February, with annual inflation at 2.9%. Core CPI slowed to 3.2%, while PPI came in softer than expected, signaling moderating price pressures.

Traders have priced in potential Fed easing by mid-year, though Fed Chair Jerome Powell has remained noncommittal. If inflation continues to decline, the case for rate cuts strengthens, which would be bullish for gold. However, if inflation stabilizes above target, the Fed could hold rates higher for longer, limiting gold’s upside.

Friday’s Equity Rebound Sparks Gold Profit-Taking

Gold retreated from its peak as equities staged a sharp recovery on Friday. The Dow gained 1.65%, while the S&P 500 climbed 2.13%, easing risk aversion. The lack of new tariff headlines and a rebound in tech stocks encouraged investors to move back into equities, triggering mild profit-taking in gold.

The pullback was not significant—gold remains near record highs—but highlights its sensitivity to shifts in risk sentiment. If stocks continue to stabilize, gold could see consolidation before the next catalyst emerges.

Fed Meeting to Set Gold’s Next Direction

Next week’s Federal Reserve meeting will be the key driver for gold. The Fed is expected to hold rates steady, but Powell’s guidance on future policy moves will be critical. If the Fed signals it remains on track for rate cuts, gold could resume its upward momentum. However, if policymakers push back against easing expectations, gold may see further consolidation.

For now, gold remains underpinned by trade risks, central bank demand, and rate expectations. The Fed’s message next week will determine whether it holds near record levels or pulls back further.

Technically, the weekly trend is up according to the main swing chart and the 52-week moving average.

A trade through $3005.04 will reaffirm the uptrend, while a move through $2832.72 will change the minor trend, shifting momentum.

Given the short-term range of $2536.85 to $3005.04, its pivot at $2770.94 is the first support level. Things could get interesting if this level fails since the next major support is the 52-week moving average at $2554.88.

More Information in our Economic Calendar.