Dollar and Gold Defy Gravity as Global Risks Deepen

Key Takeaways:

*The USD’s rally is fueled by weakness elsewhere, as political and economic instability in Japan and Europe pushes investors toward the greenback.

*Gold’s surge above $4,000 shows deepening global unease; both retail and institutional demand are rising amid central bank diversification and geopolitical strain.

*Conflicting FOMC signals between dovish and hawkish members have clouded U.S. policy direction, spurring demand for safe-haven assets.

Market Summary:

The U.S. Dollar and Gold are both benefiting from the same underlying global unease, though for different reasons. The Dollar Index (DXY) has climbed toward 99.00, supported less by domestic optimism than by global fragility. With Japan’s political transition rekindling dovish expectations and Europe mired in industrial and political strain, investors continue to view the dollar as the “least ugly” major currency. Despite a prolonged U.S. government shutdown clouding data visibility, the greenback’s dominance confirmed by BIS data showing it on one side of nearly 90% of all FX trades has reinforced its safe-haven appeal.

Gold, meanwhile, has surged past $4,000 per ounce, defying its usual inverse correlation with the dollar. This simultaneous rally highlights how both assets are being driven by overlapping geopolitical, fiscal, and monetary risks. Investors are hedging not just near-term volatility but deeper structural uncertainty. The latest FOMC minutes exposed internal rifts: Governor Stephen Miran favors rapid easing to protect jobs, while Kansas City’s Jeff Schmid warns against underestimating inflation persistence. This policy ambiguity has weakened confidence in direction, amplifying demand for alternative stores of value.

Monetary and structural factors continue to power gold’s ascent. Central banks are set to buy over 1,000 tonnes for a fourth straight year, with official holdings now exceeding U.S. Treasuries for the first time since the mid-1990s—a symbolic shift in reserve strategy. Record ETF inflows and steady retail buying broaden the rally’s base. Meanwhile, persistent geopolitical flashpoints from Russia’s “hybrid warfare” rhetoric to widening U.S.-EU frictions have turned gold into a universal hedge. Together, these dynamics create a paradox where the dollar thrives on relative stability while gold thrives on eroding trust, each rising for opposite but reinforcing reasons.

Looking ahead, the durability of this dual strength hinges on U.S. fiscal negotiations, the depth of Fed easing, and global growth risks. If U.S. data remain frozen by the shutdown, markets will continue trading on relative narratives buying the dollar for liquidity and gold for protection. Both assets should stay key barometers of confidence in global governance and monetary stability.

Technical Analysis

DXY, H4

The US Dollar Index (DXY) has continued its upward momentum after breaking above the descending trendline resistance, signaling a shift in market sentiment from consolidation to bullish bias. The index recently tested the 99.00 zone but faced minor resistance near this level, prompting a slight pullback. Despite that, the structure remains constructive as long as price holds above the 98.15 support level, which aligns with the 20-period moving average. Sustained buying pressure could see the dollar retesting the 99.60 resistance, with a breakout potentially opening the path toward the psychological 100.25 level.

From an indicator perspective, the RSI is hovering near 68, suggesting strong bullish momentum but nearing overbought territory, hinting at the possibility of a short-term pause or minor correction. Meanwhile, the MACD remains above the signal line, reinforcing the prevailing bullish momentum. 

Overall, DXY’s short-term trend appears bullish, but traders should monitor whether the index can maintain its strength above 98.40 to confirm the continuation of this rally.

Resistance levels: 99.60, 100.25
Support levels: 98.70, 98.15

XAUUSD, H4

Gold (XAU/USD) is consolidating near the $4,020 region after retreating from recent highs, with price action showing signs of short-term exhaustion following a strong bullish rally. The metal remains supported by the 20- and 50-period moving averages, but momentum has softened as bulls struggle to push decisively above the $4,065–$4,100 resistance zone.

The current pullback is testing the 23.6% Fibonacci retracement at $4,065, a level that aligns with the short-term ascending trendline support. A sustained close below this area could open the door toward deeper retracements at $4,000 and $3,980, where buyers may look to re-enter. Conversely, a rebound from the current range would see resistance at $4,100 and the Fibonacci 61.8% extension near $4,150.

Momentum signals indicate consolidation rather than clear directional conviction. The RSI has eased to around 50, reflecting a neutral bias, while the MACD shows fading bullish momentum as its histogram contracts and signal lines narrow. Overall, gold appears to be pausing within a broader uptrend that a break of either $4,065 or $4,000 will likely dictate the next directional move.

Resistance levels: 4065.00, 4100.00

Support levels: 4000.00, 3980.00