Dollar Rises on Global Turmoil as Gold Hits Record Highs

Key Takeaways:

*The U.S. dollar strengthened as political instability in Europe and Japan drove safe-haven inflows, offsetting pressure from Washington’s prolonged government shutdown.

*Fed cautious on rate cuts on an October easing, several Fed officials emphasized restraint, supporting yields and keeping the greenback resilient.

*Gold breaks record highs for the first time, boosted by geopolitical risk, Fed easing expectations, and central bank demand, particularly from China.

Market Summary:

The U.S. Dollar extended its advance as deepening political turmoil in Europe and Japan fueled safe-haven demand, offsetting domestic headwinds from Washington’s protracted government shutdown. The greenback’s resilience was underpinned by elevated Treasury yields and firm remarks from Federal Reserve officials, who signaled caution against cutting rates too soon despite mounting market expectations for an October policy easing. The yen’s collapse following Sanae Takaichi’s election and France’s political crisis culminating in the prime minister’s resignation further reinforced global capital flows into the dollar as investors sought refuge amid uncertainty.

However, the dollar’s strength remains fragile. The ongoing shutdown has deprived policymakers of crucial data on inflation and labor conditions, leaving the Fed “flying blind.” Internal divisions have emerged within the central bank—Governor Stephen Miran argues for rapid cuts to prevent a growth slowdown, while others, including Kansas City Fed’s Jeff Schmid, stress the need to stay restrictive. This policy discord, coupled with rising U.S. debt concerns, has injected volatility into rate expectations and tempered the greenback’s upside momentum.

Gold, meanwhile, continues to thrive on the same macro undercurrents driving dollar volatility. The metal surged past $4,000 per ounce for the first time, powered by geopolitical anxiety, Fed easing expectations, and unrelenting central bank buying led by the People’s Bank of China. The prolonged U.S. fiscal impasse and Europe’s political instability have amplified global interest in hard assets, fueling what markets increasingly call a “debasement trade.” With Goldman Sachs projecting gold to reach $4,900 by end-2026, investor sentiment remains decisively bullish.

Still, some near-term consolidation may occur as traders book profits and risk appetite improves. Yet the broader backdrop marked by fiscal strain, sticky inflation, and weakening confidence in fiat currencies remains supportive. As policy uncertainty deepens and rate cuts approach, gold’s role as both a hedge and a store of value looks set to strengthen into year-end.

Technical Analysis

DXY, H4

The U.S. Dollar Index (DXY) has extended its rebound, breaking above the descending trendline resistance and advancing toward the 98.70 zone. The move marks a bullish breakout from the previous consolidation phase, underpinned by strong follow-through momentum from the 97.55 support base. Price action now tests the upper boundary of the recent range, with resistance seen at 98.70 and next targets at 99.60 and 100.25 if upside pressure persists. On the downside, immediate support rests at 98.15, followed by 97.55, which serves as the key pivot for short-term trend confirmation.

RSI has risen to 72, indicating overbought conditions and suggesting that a minor pullback or consolidation could emerge before any sustained move higher. Meanwhile, MACD momentum remains positive with a widening bullish spread, signaling strong directional bias in favor of the dollar.

Overall, the DXY’s short-term bias is firmly bullish following the breakout above trend resistance, though stretched momentum implies potential for near-term profit-taking. Traders will monitor whether price can hold above 98.15 to sustain upward momentum, with broader sentiment still supported by safe-haven flows and elevated U.S. yields.

Resistance levels: 98.70, 99.60
Support levels: 98.15, 97.55

XAUUSD, H4

Gold extended its powerful rally, climbing toward the $4,000 level and approaching above the key 1.618 Fibonacci extension at $3,970, signaling continuation of the strong bullish momentum established from the late-September breakout. The metal remains firmly above its 20- and 50-period moving averages, with the recent consolidation near $3,880 acting as a springboard for renewed upside. Immediate resistance lies at $4,000, a psychological barrier that could trigger short-term profit-taking, while near-term support is seen at $3,880 and $3,790.

Momentum indicators remain firmly bullish that the RSI at 78 suggests overbought conditions but reflects persistent buying pressure, while MACD maintains a wide positive spread, reinforcing the strength of the uptrend. A minor pullback toward the 20-SMA could occur as momentum cools, but the broader bias stays positive as long as price holds above the $3,790–$3,800 zone.

Overall, gold’s short-term outlook remains bullish amid safe-haven demand and the broader “debasement trade” narrative. However, with momentum stretched, traders may look for a brief consolidation before another attempt to clear the $4,000 psychological mark.

Resistance levels: 4000.00, 4190.00
Support levels: 3970.00, 3880.00