A new wave of an unusual trade has been unfolding: A steep rally in Gold, coinciding with a steep rally in the US Dollar.
Today’s piece will focus on the latter, but it is still an interesting subject that marks an essential functioning of markets: It’s all about what is priced in (and what is not).
You have probably seen the headlines, but Gold officially breached the $4,000 milestone overnight, propelled by a larger RBNZ Rate cut, weakening the Kiwi dollar and trouble in Japanese and European (French) politics.
A US Government Shutdown is also in the works. But wait, why is the Greenback also rallying?
Mentioned after the FOMC September press conference, a less dovish than expected FED with, despite weakening, still strong US Data is forcing a slower rate cut path ahead, providing a floor to the USD.
Also, US Dollar bearishness had been such a prominent theme throughout the first half of 2025 that things couldn’t get much worse except for an unpleasant tariff outcome and degrading diplomatic US relations.
A bad-looking Government deficit is also priced, but this is not just US-specific, and it is one of the core reasons why Gold loves this trend so much.
Hence, as these themes play out and things actually degrade elsewhere, relative strength comes in. And it is here that the US Dollar wins in the current picture.
Let’s explore this in a Dollar Index technical review.
