Gold Gains as USD Softens: What’s Next?

Gold has recently stabilised near its record peak due to the dollar softening and central bank demand, while market analysts predict a high chance of price cuts. The market shows signs of building up energy. Explore what could be expected of this precious metal following the latest Fed rate decision to cut rates for the first time in 2025:

TL;DR

• Gold is consolidating after hitting a new all-time record last week at $3,700/oz due to Federal Reserve rate cut predictions and ongoing geopolitical conflicts. 

• The market now watches for a crucial technical point where $3,500 serves as support and $3,800 functions as resistance. At the same time, investors wait for the Federal Reserve to announce more rate cuts during 2025.

Gold Maintains Strength Near Record Levels

Last week, on 16 September 2025, the gold price showed stability at $3,650 per ounce after achieving its highest point at $3,700. The 39.60% price increase throughout 2025 stems from multiple positive market elements, which indicate sustained price growth in the upcoming months.

The current market shows signs of reaching a critical turning point. On 18 September 2025, the price of gold reached 3,700 per troy ounce while investors maintained their buying activity. The ascending triangle pattern shows that gold prices have exceeded their top boundary, which analysts believe will lead to a price target of $3800.

The market shows strong positive trends throughout its entire structure. Gold's price increased by 6.88% during September while showing a 47% gain compared to September 2024, which outperforms all major investment categories.

Gold Price Prediction: Fed Rate Cuts Drive 2025 Rally

The Federal Reserve's monetary policy pivot has become a primary catalyst for gold's strength. On 17 September 2025, the Federal Open Market Committee lowered its benchmark overnight lending rate by a quarter percentage point, marking the first interest rate cut of the year. Policymakers also lowered their benchmark interest rate by 25 basis points.

More significantly for gold traders, the central bank's Federal Open Market Committee provided signals of what's down the road with two more cuts this year, another in 2026, and another in 2027, all of which would take the funds rate down to around 3%. This dovish trajectory creates a favourable environment for non-yielding assets like gold.

The decision wasn't unanimous, highlighting internal Fed dynamics. Newly appointed Governor Stephen Miran was the only policymaker voting against the quarter-point move, instead advocating for a half-point cut. This dissent may signal more aggressive easing ahead if economic conditions deteriorate further.

Fed Chair Jerome Powell characterised the cut as "risk management" rather than emergency action, though concerns intensified over the U.S. labour market even as inflation is still in the air. The unemployment rate has increased to 4.3% in August, while the Bureau of Labour Statistics' preliminary benchmark revision showed the labour market added 911,000 fewer jobs than reported from April 2024 to March 2025.

Dollar Weakness Amplifies Gold's Appeal

The inverse relationship between gold and the US Dollar Index (DXY) continues to play out predictably. The relationship between gold and the U.S. dollar has historically been inverse - when the dollar strengthens, gold typically weakens, and vice versa. This dynamic has become particularly pronounced in 2025.

When the dollar weakens, gold becomes cheaper in other currencies and tends to rise in demand; when the dollar strengthens, gold costs more abroad, and demand usually falls. The weak US employment data in the past few weeks has provided room for the Federal Reserve to cut interest rates more significantly, which will weaken the dollar's interest rate advantage.

In 2025, the dollar index fell dramatically, down about 10.8% in the first half of the year, as investors sold USD amid global policy concerns. At the same time, gold hit new record highs. However, traders should note that in 2023 and 2024, we witnessed an unusual phenomenon: both gold and the dollar demonstrated significant strength simultaneously, suggesting the relationship isn't always perfectly inverse.

XAU/USD Trading Analysis: Dollar Weakness Fuels Gold Gains

Last week, on  19 September 2025,  gold’s support levels were at $3500 – $3470 – $3390 per ounce, while its resistance levels were $3545 – $3580 – $3630 per ounce. The psychological $3,500 level has emerged as particularly significant, and this will more likely than not remain a "buy on the dips" market.

Looking ahead, price momentum could push prices to $3800 per ounce, while Short-term pullbacks should see a bit of support near the $3520 level. The 50-day exponential moving average near $3,400 provides additional technical support.

Geopolitical Tensions Underpin Safe-Haven Demand

The fundamental price support for gold comes from ongoing geopolitical uncertainties. The unstable Middle East region drives up gold demand due to military conflicts and market unpredictability that can lead to price increases. The ongoing conflicts generate multiple security risks which traders need to evaluate.

The 2025 geopolitical situation includes multiple active conflict areas that affect gold market prices differently. The current market shows gold prices at $2,586 and silver prices at $31, which marks their highest point since 2012. Tensions between nations spread past their immediate conflict areas because Brazil's upcoming BRICS presidency in 2025 creates uncertainty about Venezuela's membership status during this time of strained diplomatic relations.

The ongoing Russia-Ukraine conflict maintains its position as a leading factor influencing gold prices. The market shows increased worry due to recent conflict escalation while tensions in the Middle East persist. 

Central Bank Gold Buying: 900 Tonnes Structural Demand

Central bank gold purchasing has emerged as perhaps the most significant structural support for prices. This strategic pivot, projected to see central bank gold demand hit a staggering 900 tonnes in 2025, is proving to be the "silent buyer" underpinning gold's robust and seemingly unstoppable price performance.

The scale of official sector buying has reached historic proportions. Over the past three years, central banks have purchased more than 1000t of gold annually, compared to just 400t-500t per year in the prior decade. This acceleration reflects fundamental changes in how central banks view gold's role in reserves.

Survey data reinforces this trend's sustainability. In a recently released Central Bank Gold Reserves Survey 2025, 43% of central bankers surveyed stated their own central bank would increase its gold reserves, and 95% believed that official gold reserves would continue to increase in the next 12 months. (Source: World Gold Council)

Risk Factors and Contrarian Perspective

The currently bullish case for gold appears strong, but investors must evaluate possible market obstacles that could limit price growth or create market downturns.

The buying trend of central banks might change during extreme currency crises because some nations could sell their gold reserves to protect their exchange rates. The historical record shows emerging market central banks have sold their gold reserves during currency breakdowns or to take profits.

The Federal Reserve's unexpected interest rate hikes or successful geopolitical conflict resolution would lead to a stronger dollar, which would negatively impact gold prices. The Federal Reserve increases interest rates, which leads to a stronger U.S. dollar as investors choose dollar-denominated assets that provide higher returns. The value of gold tends to decrease when interest rates rise.

The market faces profit-taking risks because gold prices have risen more than 40% yearly. The technical indicators for gold show decreasing bullish momentum, which may lead to short-term market stabilisation or price adjustments.

Gold can experience sudden volatility. Throughout its history, the precious metal has shown multiple long-term price decreases. Risk management is a critical factor.

* Past performance is not indicative of future results. The above are only projections and should not be taken as investment advice.