Dollar Strengthens, Sending Gold Prices Tumbling
NEW YORK – Teh U.S. dollar surged Tuesday, driving gold and silver prices to one-week lows as easing trade tensions and shifting monetary policy expectations rattled markets.The dollar’s gains followed a political progress in Japan and contrasted with a stabilizing euro amid diverging central bank strategies.
The USD/JPY exchange rate rose 0.79% as Sanae Takaichi secured victory in the parliamentary vote for Japan’s Prime Minister. Takaichi’s pro-stimulus policies are viewed as bearish for the yen, further pressured by a record-high Nikkei Stock Index that diminished safe-haven demand. Meanwhile, the euro found some support as the Federal Reserve is anticipated to continue cutting interest rates while the European Central Bank (ECB) appears to have concluded its easing cycle.Swaps currently price in only a 2% chance of a 25 basis point rate cut by the ECB at its October 30 policy meeting.
Precious metals faced significant selling pressure. December COMEX gold closed down $250.30 (-5.74%), and December COMEX silver fell $3.680 (-7.16%). The stronger dollar directly impacted metals prices, but a key catalyst was President Trump’s statement that relations with China “will be fine,” triggering considerable liquidation of long positions in precious metals.
Despite Tuesday’s sharp decline, gold and silver have benefited from safe-haven demand fueled by ongoing US tariffs, geopolitical risks, central bank buying, and US-China trade tensions. President Trump’s criticisms of Federal Reserve independence have also contributed to gold’s appeal.Recent weaker-than-expected US economic data continues to support expectations for further Fed rate cuts, a traditionally bullish signal for precious metals. Fund buying of precious metal ETFs remains a supportive factor, with gold holdings reaching a three-year high on monday and silver holdings hitting a 3.25-year high last Tuesday.
Japan’s September machine tool orders were revised upward to an 11.0% year-over-year increase, the largest in six months, initially reported at +9.9% y/y.
