Gold’s Rally May End the Same Way Again. Forecast as of 21.10.2025 | LiteFinance
Over the past 50 years, gold has twice surged to record highs, driven by inflation and a weaker US dollar, only to tumble afterward. Let’s discuss this topic and make a trading plan for the XAUUSD pair.
The article covers the following subjects:
Major Takeaways
- Elevated inflation and dollar weakness are favorable for the XAUUSD pair.
- De-dollarization trends and central bank purchases are supporting gold.
- The precious metal still has room to grow.
- Consider long trades during pullbacks, once the price exceeds $4,300.
Weekly Fundamental Forecast for Gold
One event can be dismissed as a coincidence, two begin to suggest a pattern. Gold now faces a test of the market’s favorite rule, implying that what has happened before will happen again. Over the past half-century, gold has experienced only two rallies as strong as the current one, and both ultimately ended in sharp drops.
In the 1970s and 2011, fears that high inflation would undermine the US dollar drove the XAUUSD price to all-time highs. Half a century ago, the White House pressured the Fed to slash the interest rate amid high consumer prices, and in 1979, gold soared by 140%. However, when a new Fed chair took over and launched an aggressive tightening cycle, the metal quickly plummeted.
Spot Gold and US Dollar Index Movements
Source: Bloomberg.
After the 2008–2009 global financial crisis, central banks rushed to rescue the world economy. Ultra-low interest rates and an unprecedented wave of cheap liquidity spurred fears of accelerating inflation that the Fed might struggle to control. At the same time, the US dollar weakened under the weight of massive monetary stimulus. Gold climbed to a record high in 2011, a level it would not reach again until the pandemic. After that peak, gold retreated for five consecutive years.
Investors are now focused on two key questions: how much higher the XAUUSD pair can go, and whether history will repeat itself. So far, gold ETF holdings have not returned to their record levels, indicating that the metal’s rally might not be over yet.
Gold ETF Holdings
Source: Bloomberg.
In 2024–2025, gold prices doubled, buoyed by high inflation and a fragile US dollar. Fears that US tariffs would push consumer prices even higher have not yet fully materialized. However, the Fed’s apparent willingness to overlook elevated CPI and PCE readings speaks volumes. Where can investors turn for safety? Gold remains the most reliable option.
Donald Trump’s push to force the Fed to cut interest rates to 1%, no matter the cost, is only adding fuel to the fire. Trump’s willingness to use any means necessary is undermining confidence in the US dollar. The same goes for the military conflict in Ukraine, which has accelerated de-dollarization and prompted central banks to increase their gold reserves.
Weekly Trading Plan for XAUUSD
Only easing geopolitical tensions in Eastern Europe may bring the XAUUSD rally to an end. Any credible US efforts to broker peace would likely restore confidence in the US dollar and reduce investors’ appetite for gold. For now, it is too early to make such assumptions. Consider long trades during a pullback, once the price hits the previously set target of $4,300.
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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