Fed Jitters Slam Dollar, Lift Gold

Key Takeaways:

*Dollar Under Pressure – Fed cut bets, political turmoil, and tariff rulings eroded the greenback’s safe-haven premium.

*Gold Near Record Highs – Lower real yields, institutional inflows, and geopolitical risks fueled bullion’s rally.

*NFP in Focus – Friday’s jobs data will shape Fed expectations, with weak prints likely to push gold above $3,500.

Market Summary:

The U.S. Dollar Index (DXY) extended its slide to a five-week low as markets leaned heavily into September rate-cut bets, with softer labor market signals and deepening political uncertainty undermining the greenback’s footing. Downward revisions to hiring data reinforced the narrative of a cooling economy, while futures markets now fully price a 25bps cut next month and assign growing odds of additional easing thereafter. A federal appeals court ruling that much of the Trump administration’s tariff framework was illegal added a fresh layer of uncertainty to trade policy, keeping dollar sentiment on the defensive.

Structural concerns are amplifying the pressure. President Trump’s bid to remove Fed Governor Lisa Cook—and the ensuing legal standoff—has stoked doubts about central bank independence, eroding institutional credibility. Combined with mounting fiscal strains and the longer-term risk of de-dollarization, underscored by new initiatives at the Shanghai Cooperation Organisation to expand non-dollar trade finance, investors have begun questioning the dollar’s durability as a safe haven.

Gold has been the mirror beneficiary. Bullion surged toward record highs near $3,470 per ounce as investors rotated into hard assets, with falling real yields and Fed easing expectations reducing the opportunity cost of holding non-yielding metal. Institutional flows into ETFs have accelerated, reflecting not only demand for an inflation hedge but also a strategic shield against governance risks, policy missteps, and geopolitical volatility. Heightened tensions between Russia and Ukraine, alongside unresolved U.S. trade frictions with India and China, have reinforced safe-haven demand even as sporadic headlines of de-escalation tempered gains at the margin.

Looking ahead, the twin release of Friday’s Nonfarm Payrolls and the Fed’s subsequent response will be pivotal in setting near-term direction. A weaker jobs print would cement expectations of pre-emptive easing, extending dollar losses and potentially propelling gold through the $3,500 threshold. Conversely, stronger labor data could slow bullion’s momentum, but given the backdrop of institutional fragility and trade policy uncertainty, the dollar’s downside risks may persist regardless of temporary economic resilience.

Technical Analysis

DXY, H4

DXY is consolidating near 97.70 as bearish sentiment lingers, keeping pressure on the 97.65 support zone. A sustained break lower would strengthen the bearish case toward 97.10, while a recovery above 98.10 could spark renewed buying interest toward 98.75.

Momentum signals remain cautious. The Relative Strength Index (RSI) is at 39, reflecting a mild downside bias but not yet oversold. The MACD stays in negative territory, hovering below the zero line, indicating persistent bearish momentum though without strong acceleration.

On the upside, a decisive move above 98.10 would shift focus back to 98.75 and open the door toward 99.50 if buying interest builds. On the downside, a clear break below 97.65 would further weaken, potentially dragging the index toward the 97.10 zone.

Resistance levels: 98.10, 98.75
Support levels: 97.65, 97.10

XAUUSD, H4

Gold (XAU/USD) has extended its advance to the $3,471 area, with buyers firmly in control after reclaiming the $3,435 and $3,460 levels. The rally is gathering momentum, putting the spotlight on $3,495 as the next upside target, while $3,435 and $3,400 now form immediate floors.

The latest surge has pushed the RSI deep into overbought territory at 81, underscoring the strength of the move but also flashing caution of a possible near-term correction. MACD readings remain decisively positive, with an expanding histogram confirming strong upside momentum, though the pace of gains may soon face resistance from profit-taking.

Overall, XAU/USD stays in a powerful uptrend above $3,435, with bulls eyeing a push toward $3,495 and potentially $3,520 if momentum persists. However, the overbought RSI suggests near-term consolidation or a dip back toward $3,435 cannot be ruled out before the next leg higher.

Resistance levels: 3495.00, 3520.00
Support levels: 3435.00, 3400.00