KUALA LUMPUR, MALAYSIA – May 2025 proved to be a tumultuous month for gold traders, with the XAUUSD—gold’s primary trading instrument—experiencing significant fluctuations. The price ranged between $3,120 and $3,435 per ounce, ultimately finishing the month nearly unchanged. This marked a fifth consecutive monthly gain, yet it was a stark contrast to the previous months when gold consistently reached new all-time highs.
Market Dynamics: A Month of Indecision
Trading began on a bearish note, but support emerged around the $3,200 mark, allowing for a slight rebound. However, the inability to break above the critical $3,430 threshold led to a short-term bearish trend, with prices plummeting nearly 9% by mid-May. A combination of technical dip-buying and robust safe-haven demand facilitated a recovery, keeping XAUUSD comfortably above its 50-, 100-, and 200-day moving averages. Notably, the formation of a strong doji candlestick on the monthly chart indicated trader indecision, hinting at a potential mid-term reversal.
Influential Market Events
The month was characterized by several notable market-moving events:
5-6 May: XAUUSD rallied over 6% in just two days, driven by increased buying from China following its Labour Day holiday. Concurrently, President Trump’s announcement of a 100% tariff on foreign films reignited trade war fears, weakening the U.S. dollar and making gold more attractive to foreign investors.
7-12 May: Gold began to retreat from the $3,430 level as the market anticipated easing trade tensions ahead of a meeting between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng. The announcement of a temporary trade deal between the U.S. and China on 12 May resulted in a 3% drop in gold prices, continuing a downward trend for the next three trading sessions.
15 May: After hitting critical support at $3,150, gold prices rebounded nearly 2%, aided by soft U.S. Producer Price Index (PPI) data that raised expectations for further rate cuts by the Federal Reserve.
20 May: Following Moody’s downgrade of U.S. debt, President Trump’s push for a sweeping tax-cut bill exacerbated concerns over the federal budget deficit, leading to a decline in the U.S. dollar and a rise in gold prices towards $3,300.
23 May: Renewed tariff threats from Trump prompted a nearly 2% increase in gold prices as investors sought safe-haven assets.
29 May: After a three-day decline, XAUUSD rose again following a U.S. appeals court reinstating tariffs that had previously been blocked.
Kar Yong Ang, a financial market analyst at Octa, remarked, “May was a wild ride for the gold market thanks to America’s erratic trade policies.” The chaotic nature of U.S. trade policy has left traders grappling with uncertainty, as the XAUUSD monthly chart reflects significant indecision.
The Role of Physical Demand
Physical demand for gold has been a crucial driver of its price in recent months. A report from Hong Kong’s Census and Statistics Department revealed that China’s gold imports via Hong Kong nearly tripled in April, reaching their highest level in over a year. The People’s Bank of China (PBoC) has been actively adding to its gold reserves, which now stand at 2,295 metric tons, constituting 6.8% of total reserve assets. Other countries, including India and Russia, have also continued to stockpile gold, with global central banks adding over 240 tons to their reserves in Q1 2025.
Interestingly, U.S. trade policy has also influenced physical flows among Western nations. Swiss customs data indicated that gold imports from the U.S. surged to their highest monthly level since at least April 2012, as traders sought to hedge against potential tariffs on bullion imports.
Investor Sentiment and Speculation
Despite the fluctuations, global investors remain bullish on gold. As of 27 May, large speculators were net-long on COMEX gold futures and options, with long positions totaling 152,034 contracts compared to only 34,797 short contracts. However, speculative bullish interest has begun to wane, with minor outflows from gold exchange-traded funds (ETFs) in early May.
Kar Yong Ang noted that while large speculators remain net-long, their exposure is significantly smaller than it was in September 2024, when uncertainty surrounding the U.S. Presidential elections fueled bullish bets.
Outlook for June and Beyond
The outlook for gold remains generally positive, but several factors could influence its trajectory in the coming months:
Geopolitical Uncertainty
Ongoing trade negotiations between the U.S. and other nations, particularly China, are critical to the gold market. Conflicts in the Middle East and Eastern Europe have heightened geopolitical risks, typically driving demand for gold as a safe-haven asset. While peace negotiations have begun, any progress could improve risk sentiment and negatively impact gold prices.
Global Monetary Policy
Gold is sensitive to changes in U.S. interest rates and the dollar’s value. Current market expectations suggest a dovish Federal Reserve, with anticipated rate cuts by the end of 2025. A looser monetary policy is generally bullish for gold, as it reduces the opportunity cost of holding the non-yielding asset. However, persistent inflation could prompt central banks to maintain higher rates.
Physical Demand
China’s active gold buying and the increasing trend among global central banks to diversify reserves away from the U.S. dollar could sustain physical demand for gold. Although seasonal factors may temporarily slow demand in India, the overall trend remains positive.
Technical Analysis
From a technical standpoint, XAUUSD appears bullish, with key resistance levels at $3,397, $3,438, and $3,463-$3,471. A drop below $3,125 would invalidate the bullish trend, but sideways movement is more likely than a significant downturn.
Conclusion
While the overall sentiment for gold remains bullish, signs of exhaustion in the bullish trend suggest that consolidation may be on the horizon. Analysts predict higher prices, with Goldman Sachs raising its 2025 gold forecast to $3,700 per ounce. However, the market’s optimism may be tempered by uncertainties surrounding rate cuts and geopolitical tensions.
As June unfolds, traders should remain vigilant, as key macroeconomic events and trade negotiations could significantly influence the XAUUSD trend for the next six months.
Key Macro Events in June
4 June: Bank of Canada meeting
5 June: European Central Bank meeting
6 June: U.S. Nonfarm Payroll
11 June: U.S. Consumer Price Index
15-16 June: Group-7 Summit
17 June: Bank of Japan meeting
18 June: Federal Reserve meeting
19 June: Swiss National Bank meeting
19 June: Bank of England meeting
20 June: People’s Bank of China meeting
23 June: S&P Global Purchasing Managers Indices
24-25 June: NATO Summit
26-27 June: European Council Summit
27 June: U.S. Personal Consumption Expenditure Price Index
30 June: German Consumer Price Index
In summary, while the gold market faces challenges, the fundamental outlook remains positive, driven by geopolitical uncertainty, monetary policy shifts, and robust physical demand. Traders should prepare for a potentially volatile June as the market navigates these complexities.
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