Dollar Downturn Drives Gold, Silver Higher
Gold and silver prices, having already chalked up fresh highs this week, weren’t in dire need of fresh catalysts. But they got one anyway in the form of the dollar's latest depreciation. The USD fell nearly 10% in 2025, and 2026 is following a similar path, with the DXY (Dollar Index) slipping toward the 96 level. The latest slump in the greenback has been driven by mutual interest from US and Japanese authorities in stabilising the yen through dollar sales, alongside President Trump’s apparent glee at seeing the US currency decline.
The USD/JPY rate has dropped nearly 4% over the past five days amid threats of intervention by both Japanese and US monetary officials. It seems the USD/JPY approach toward the 160 level was again a line in the sand as far as yen weakness goes, with the threat of action to bolster the yen doing the job to drive it higher (there is no evidence yet of actual official intervention). With yen strength comes dollar weakness, which Trump seemed to take great delight in when quizzed about the matter.
The US President’s response of “It’s great” when asked about the dollar’s dive is no surprise, given Trump is well aware of the boost to export competitiveness that goes hand-in-hand with a softer currency. And with Trump likely to pick a policy dove as the next Fed Chair (to replace Powell in May this year), the dollar’s plummet may have further room to run. However, with US GDP running relatively hot at 4.4% in Q3 2025, there is a risk that economic fundamentals may not align with this bearish USD scenario. That is why the interest rate decisions of the new Fed leadership from May (this year) – with respect to the economic realities on the ground – will determine whether the dollar further unravels or stages a rebound.
Gold and silver are among the prime beneficiaries of the dollar’s slump (as they become cheaper to buy for non-USD holders from an exchange-rate standpoint). Add into the mix the ongoing appetite from central banks to add precious metals as reserve assets, Trump’s trade and foreign policies keeping economic and geopolitical risks on investors' radar, and expectations for lower US rates, and it becomes clear why gold and silver have been stealing the headlines and cementing their positions as portfolio favourites.
Looking ahead, the recent FOMC meeting and US earnings season results are the events to watch. While no rate change occurred this week from the US central bank, their language and tone regarding the direction of rates from here is what investors will be watching closely. On the earnings front, quarterly results from Meta, Microsoft, Tesla, and Apple could either keep the bullish momentum going for stocks (with the S&P 500 closing at fresh all-time highs recently) or give traders pause for thought should the numbers underwhelm. But expectations are that AI spending and appetite from the ‘hyperscalers’ (such as Meta and Microsoft) will continue to grow. Let’s see if the big tech names paint a rosy outlook for the AI sector when the quarterly earnings calls and results roll in.
