The impact of current economic conditions on the dollar-gold pair (XAU/USD) depends on several interconnected factors, the most important of which are:
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🔹 First: US interest rates
• When the Federal Reserve raises interest rates, it increases the attractiveness of the dollar, which usually leads to a decrease in the price of gold, as gold does not yield a return.
• However, if the market expects a rate cut due to economic slowdown or weak data, gold becomes more attractive as a store of value, pushing it up against the dollar.
📌 Current conditions (June 2025):
• Forecasts suggest a likelihood of interest rate cuts in the second half of 2025 due to slowing inflation and weak global growth, which supports gold and pressures the dollar.
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🔹 Second: Inflation
• Gold is considered a traditional hedge against inflation. If inflation expectations in the United States or globally increase, demand for gold rises.
• The dollar may also sometimes benefit from inflation if the market expects the Fed to intervene with tightening monetary policy.
📌 Current: Inflation in the United States has started to decrease relatively, reducing the likelihood of a new interest rate hike, thus gold is rising against the dollar.
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🔹 Third: Geopolitical unrest
• Global crises (such as wars or conflicts in the Middle East or US-China tensions) boost demand for gold as a safe haven, raising its price against the dollar.
📌 Current situation: Rising global tensions and fears of a global economic slowdown enhance demand for gold.
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🔹 Fourth: Strength or weakness of the US dollar
• A rise in the dollar index (DXY) pressures gold as it is priced in dollars. The stronger the dollar, the more expensive gold becomes for holders of other currencies.
📌 Now: The dollar is declining relatively with expectations of monetary easing, opening the door for gold to rise.
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🔹 Fifth: Demand for physical gold
• Demand from central banks, investment funds (ETFs), and emerging markets like China and India can affect the price.
📌 Current situation: Increasing central bank purchases of gold as a hedge against the dollar supports gold.
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🔸 Summary:
Factor Current impact on gold against the dollar
Interest rates. 🔼 Support for the rise of gold (Expectations of a cut)
Inflation 🔼 Support for the rise of gold (slowing inflation)
Geopolitical tensions 🔼 Support for the rise of gold
Dollar strength 🔽 The dollar is declining, supporting gold
Demand for gold 🔼 Increasing, supporting the price
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✅ General outlook for the short term:
Given the current expectations, gold is likely to maintain its upward trajectory against the dollar unless there are surprises from the US Federal Reserve or global breakthroughs that reduce demand for gold.
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