The Renewed Interest in XAU/USD Among Institutional Traders
The Renewed Interest in XAU/USD Among Institutional Traders
The XAU/USD pair is one of the most liquid instruments in the forex market, reflecting the price of an ounce of gold in US dollars. Historically, institutional interest in it has fluctuated depending on global economic conditions, inflation, interest rates, and geopolitical risks. However, since late 2023, there has been a noticeable increase in XAU/USD trading volumes, especially among large banks, hedge funds, and asset managers. What is behind this trend and how does it affect the market?
Table of contents
Why is gold back in focus?
Institutional investors view gold as a strategic asset that serves as a hedge against inflation, currency instability, and systemic risks. Several factors have contributed to the return of interest in XAU/USD.
1. Federal Reserve and Global Monetary Policy
After attempting to normalize interest rates in 2022–2023, the Federal Reserve kept its benchmark rate near 5.25% as the U.S. economy began to lose momentum in 2024–2025. Slowing inflation reduced the appeal of bond yields, prompting investors to shift capital into alternative assets—including gold.
2. Geopolitical Instability
Rising tensions in Southeast Asia, political fragmentation in Europe, and ongoing trade frictions with China have pushed investors toward safe-haven assets. Gold continues to attract capital as one of the most trusted hedges during uncertainty.
3. Dollar Devaluation Risks
As budget deficits widen and national debt mounts, many institutional traders anticipate a weaker dollar in 2025. To protect their portfolios, they increase exposure to XAU/USD and use gold as a strategic hedge against currency depreciation.
Data and analytics: growing interest confirmed
According to the World Gold Council’s Q1 2025 report, institutional demand for gold has grown by 17% compared to the same period last year. CME Group recorded an increase in open interest in gold futures linked to XAU/USD by 23% compared to March 2025. Goldman Sachs noted that in 2024, gold became the third most pivotal asset in institutional risk allocation models after stocks and bonds.
BlackRock said in its December 2024 report that it had increased the allocation to gold in its physically-backed ETFs, citing dollar weakness, expectations of loose monetary policy, and increased demand for real assets.
Trading Strategies with XAU/USD Among Institutionalists
The big players don’t just buy physical gold. They actively work through derivatives, such as:
â—Ź COMEX and ICE Futures;
â—Ź Gold Options;
â—Ź High leverage CFDs;
â—Ź Algorithmic strategies through XAU/USD pairs in Forex.
Many funds use “correlation strategies” by linking the performance of XAU/USD to the dollar index, 10-year bond yields, and volatility indices (VIX).
Example: In February 2025, when Treasury yields fell on a weak labor market report, XAU/USD rose 3.2% in a day. Algorithmic traders responded immediately, amplifying the trend.
How traders’ behavior has changed
Previously, institutional players turned to gold mainly in times of crisis. Today, XAU/USD has become part of basic macro strategies. The share of “rotational allocations” has increased: when macro indicators worsen, funds redistribute capital from stocks to gold.
The rise in popularity of “haven assets” is also linked to volatility in the technology sector, with many investors opting to reduce their exposure to NASDAQ stocks and shift some of their holdings to gold.
Impact on the retail traders market
The dynamics of institutional operations also affect retail players. Increased liquidity in the XAU/USD pair and increased movements on news and trends create additional opportunities for short-term trading.
However, competition with algorithmic systems and high volatility increase risks. This requires retail traders to have a comprehensive grasp of macroeconomics and strict risk management.
Correlations and behavior of XAU/USD in 2025
According to Refinitiv (April 2025), the current correlation of XAU/USD with the dollar index (DXY) is -0.72, indicating a strong inverse relationship. At the same time, there is a moderate correlation with oil (0.48) and a negative correlation with stock indices (-0.31 with the S&P 500).
This dynamic positions gold as an effective diversification instrument during periods of volatility. Between January and May 2025, XAU/USD posted gains while the NASDAQ dropped 12% and the DXY remained flat.
Forecasts and scenarios
Morgan Stanley, in its May 2025 report, notes that gold retains the potential to rise to $2,400 per ounce in the base case. Key drivers:
â—Ź expectations of a Fed rate cut in the second half of the year;
â—Ź Geopolitical Prize;
â—Ź growing demand in China and India.
HSBC also points out that with emerging market currencies weak, gold is becoming attractive to central banks, which supports the XAU/USD rate.
Conclusion
Institutional traders have renewed their focus on XAU/USD, driven by a convergence of macroeconomic pressures and geopolitical uncertainty. Gold has reasserted itself as a core component of diversified portfolios. Rising liquidity and a broadening set of instruments have enhanced its appeal—not only as a hedge but also as a tool for active trading.
Far from serving solely as a fear barometer, XAU/USD now functions as a dynamic financial asset that responds to all phases of the market cycle. The current influx of capital from major players underscores gold’s enduring relevance and signals its return to the center of global investment strategy.
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