Gold extends rally, breaks US$5,200 as dollar tumbles and markets await Fed call

Spot gold rose 1.1% to US$5,243.58 an ounce by 0314 GMT, after earlier touching a fresh record of US$5,247.21. The metal is up more than 20% since the start of the year, after gaining more than 3% on Tuesday.

US gold futures for February delivery climbed 3.1% to US$5,237.70 an ounce.

Kelvin Wong, senior market analyst at OANDA, said the move reflected gold’s strong inverse relationship with the dollar.

He added that Tuesday’s advance in the US session followed President Donald Trump’s response to a question about the currency, which he said suggested “a broad-based consensus within the White House” in favour of a weaker greenback going forward.

Trump’s remarks about the dollar added to pressure on the currency on Tuesday, as the greenback fell to a four-year low and losses in the dollar index accelerated.

Trump dismissed concerns that the dollar had fallen too far, saying: “No, I think it’s great… the value of the dollar… dollar’s doing great.”

The dollar index, which tracks the currency against a basket of six major peers, sank to 95.566, its lowest level since February 2022.

The dollar’s weakness has been fuelled by a mix of factors, including expectations of continued Fed rate cuts, uncertainty over tariffs, policy volatility, including threats to Fed independence, and widening fiscal deficits, which have undermined confidence in the outlook for US economic stability.

A lower dollar can help US exporters, though Trump said he was not actively seeking further declines, adding: “I would want it to… just seek its own level.”

Trump also said he would soon name his choice to lead the US central bank, and predicted interest rates would fall once the new chair takes office.

The Fed is widely expected to keep rates unchanged at its January meeting, which is currently underway, according to Fedwatch.

US consumer confidence fell to its lowest level in more than 11-and-a-half years in January, as concerns mounted over a weaker labour market and elevated prices.

Wong said near-term resistance for gold could emerge around US$5,240 an ounce.

Deutsche Bank said on Tuesday that gold could reach US$6,000 per ounce in 2026, citing sustained investment demand as central banks and investors increase allocations to non-dollar and tangible assets.

Other precious metals also advanced.

Spot silver gained 1.9% to US$115.11 an ounce after hitting a record US$117.69 on Monday; it is up nearly 60% so far this year.

Spot platinum rose 2% to US$2,692.60 an ounce after reaching a record US$2,918.80 on Monday.

Palladium added 1.4% to US$1,961.68.

He made the comments in Iowa ahead of a speech expected to focus on the economy, as he looks to energise rural supporters in a state hosting key congressional races in November.

Trump also pointed to past disputes with Asian economies over currency levels, saying: “If you look at China and Japan, I used to fight like hell with them, because they always wanted to devalue.”

The greenback has been under pressure in recent sessions as traders positioned for the possibility of coordinated action by US and Japanese authorities to support the weak yen.

The yen rallied as much as 4% over the past two sessions on talk of the US and Japan conducting “rate checks”, often viewed as a precursor to official intervention.

Steven Englander, head of global G10 FX research and North America macro strategy at Standard Chartered in New York, said FX traders are “always looking for a trend to jump on”, and that when officials typically push back against abrupt moves, “when the President expresses indifference or even endorses the move, it emboldens USD sellers to keep pushing”.

Analysts noted the downsides of a weaker dollar, including inflation risks as imports become more expensive, but also pointed to potential benefits for some businesses.

A softer currency can make it cheaper for multinationals to convert overseas earnings into dollars, improve export competitiveness, and ease repayment burdens for foreign borrowers with dollar-denominated debt.

Eugene Epstein, head of trading and structured products at Moneycorp in New Jersey, said: “The administration wants a weaker dollar,” adding that it could also help narrow the trade deficit.

“The point is, he’s basically making clear that he’s a president who cares about the trade deficit,” Epstein said.

Steve Sosnick, market strategist at Interactive Brokers in Greenwich, Connecticut, said a weaker dollar was “a two-sided coin”: it can aid multinationals by improving the conversion value of foreign-currency revenues, but “on the other hand, it makes imported goods more expensive” and could have “some inflationary impact” as a result.

Reuters