Calmer Tone Lifts Dollar Briefly, But Safe-Haven Flows Anchor Gold’s Record Run

Key Takeaways:

*Trade Tone Softens: President Trump’s reassurances that the U.S. is “not looking to hurt China” eased fears of a renewed trade escalation.

*Fragile Dollar Rebound: The dollar’s gains remain tentative amid a prolonged U.S. government shutdown, mounting debt concerns.

*Gold’s Record Surge: Gold extended its rally, supported by negative real yields, strong central bank demand, and persistent political uncertainty.

Market Summary:

The U.S. dollar clawed back modest ground as President Donald Trump’s softer rhetoric toward China helped ease fears of an immediate escalation in trade tensions. Over the weekend, Trump reassured markets that “everything would be fine” and emphasized that Washington was “not looking to hurt China,” comments widely seen as a tactical retreat from confrontation. The shift in tone injected a measure of calm into financial markets, spurring a short-term dollar rebound and modest relief in risk sentiment. However, beneath the surface, the greenback’s footing remains fragile, weighed by deepening political dysfunction, a dovish Federal Reserve outlook, and lingering uncertainty over the U.S. fiscal trajectory.

The protracted U.S. government shutdown now entering its third week has become a significant drag on confidence and policymaking. With Speaker Mike Johnson warning the impasse could become the longest in history, investors are contending with a growing data blackout that complicates the Fed’s policy assessment. The market has largely priced in two additional rate cuts for 2025, with policymakers signaling an increased willingness to act should fiscal and political paralysis undermine economic momentum. The combination of subdued yields, mounting debt concerns, and potential Fed easing has weakened the dollar’s yield advantage, prompting capital to rotate toward non-yielding safe-haven assets such as gold.

Gold, in turn, has surged to successive record highs above $4,100 per ounce, extending one of its strongest runs in decades. The rally reflects both a structural revaluation and a tactical hedge against policy and geopolitical instability. Real yields have turned increasingly negative as inflation expectations hold firm against falling nominal rates, reinforcing gold’s attractiveness as an alternative store of value. The ongoing U.S.–China friction, uncertainty surrounding U.S. fiscal negotiations, and the broader perception of policy inconsistency have driven robust demand from central banks and institutional investors alike. While short-term technical indicators suggest overbought conditions, the fundamental narrative remains powerfully bullish: in an environment where the Fed is leaning dovish, the government is paralyzed, and geopolitical risks remain elevated, gold continues to thrive as the ultimate hedge against systemic uncertainty.

Technical Analysis

DXY, H4

The U.S. Dollar Index is holding firm near the 99.30 zone, consolidating after last week’s breakout above the long-term descending trendline. Price action remains comfortably supported by the 20- and 50-period moving averages, indicating a continuation of bullish momentum as long as the index stays above 98.70. The next key resistance lies at 99.60, and a sustained close above this level could open the door toward the 100.25 psychological mark.

Momentum indicators show early signs of stabilization after a brief correction. The RSI hovers around 62, suggesting that bullish momentum is cooling but not yet overextended, while the MACD line remains slightly above the signal line, reflecting a modestly positive bias.

Overall, the technical setup favors a buy-on-dip stance as long as the DXY holds above 99.00 support. A decisive move above 99.60 could extend the rally toward the 100 handle, whereas a break below 98.70 would weaken the near-term structure and shift focus back to 98.15 support.

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

XAUUSD, H4

Gold extended its climb, trading near $4,130, marking a strong continuation of the uptrend that began in early September. The metal remains well-supported above its short-term ascending trendline and the 20- and 50-period moving averages, reinforcing a solid bullish structure. Immediate resistance is seen at $4,160 (50% Fibonacci extension), followed by the $4,205–$4,275 zone if momentum persists.

Momentum indicators show that buying strength remains intact but slightly stretched. The RSI hovers around 75, signaling overbought conditions, while the MACD continues to widen on the upside confirming bullish momentum but hinting that a minor pullback could be due.

Overall, the bias stays bullish above $4,050, with potential for short-term consolidation before the next leg higher. A clean break above $4,205 would open the path toward $4,360, while failure to hold $4,050 could trigger a corrective dip toward $3,955 support.

Resistance levels: 4160.00, 4205.00
Support levels: 4110.00, 4050.00