The decline in the dollar exchange rate directly reduces the cost of gold denominated in USD to holders of other currencies, thus stimulating global demand. On Wednesday, the US dollar index fell back after a slight cut of one-week high, closing down 0.13% to 98.20. Although this decline is not severe, it is enough to get gold prices out of the early lows and achieve a significant rebound.
The root cause of the weakening of the US dollar lies in the superposition of multiple factors, including the public pressure on the Fed by US President Trump and the market’s repricing of the Fed’s future path to cut interest rates.
Trump called on Fed Director Cook to resign and further exacerbate the suspicion of political interference on his alleged mortgage fraud. This intervention is interpreted by the market as a challenge to the independence of the Federal Reserve, which has caused investors’ confidence to shake and the US dollar to fall under pressure.
Independent metals trader Tai Wong pointed out that traders have regarded employment data before the Fed’s July meeting as outdated information and instead focus on more forward-looking policy signals. Against this background, gold’s attractiveness as a non-dollar asset has significantly increased, attracting a large amount of capital inflows and driving prices to continue to rise.
Goldman Sachs maintained its strong forecast for gold, believing that gold prices will reach $4,000 per ounce by mid-2026. This view is based on three pillars: strong structural demand from central banks, the Fed’s easing policy supports inflows of exchange-traded funds (ETFs), and a 30% chance of a U.S. economy recession in 12 months. The continued strength of central bank demand is due to global de-dollarization trends and geopolitical risks, and the Fed’s easing expectation will further stimulate ETF inflows and drive gold prices to rise in the medium and long term.
Goldman Sachs’ analysis emphasized that gold is not only a short-term hedging tool, but also a stabilizer of long-term investment portfolios, especially in the context of rising recession risks. This forecast injected confidence into the gold market and attracted more institutional investors to make arrangements.
