Gold declined as ceasefire hopes and ETF outflows weigh on sentiment

20 May 2025

Today market analysis on behalf of Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A

Gold prices fell on Tuesday, pressured by growing optimism surrounding a potential ceasefire between Russia and Ukraine. US President Donald Trump announced that both countries had agreed to begin negotiations “immediately,” which lifted sentiment and reduced demand for safe-haven assets such as gold.

The metal also came under pressure from increasing outflows. Gold-backed ETFs recorded a net outflow of 30 tonnes last week, marking the largest withdrawal since September 2022. Persistent ETF outflows could signal waning institutional interest and could continue to weigh on gold in the near term.

On the monetary front, markets continue to price in at least two Federal Reserve rate cuts in 2025, following weaker-than-expected inflation and retail sales data. However, recent hawkish remarks from Fed officials have introduced caution around the timing and magnitude of policy easing. This more measured stance may limit the upside potential for non-yielding assets like gold.

Meanwhile, tensions in the Middle East persist and could provide support for the bullion.

Looking ahead, investor attention will turn to speeches from Fed policymakers, upcoming US economic data, including S&P Global’s preliminary PMIs, and progress in geopolitical negotiations, all of which are likely to shape gold’s short-term outlook.

 

Zaid Barem / ymm