Dollar Dips as Fed Easing Expectations and Geopolitical Risks Lift Gold

Key Takeaways:

*Dollar slides to 2.25-month low as markets digest soft U.S. economic reports and Fed liquidity expansion.

*November payrolls slightly beat expectations, but October payrolls revised sharply lower; unemployment rises to four-year high of 4.6%.

*Gold edges higher as safe-haven demand persists, supported by Fed liquidity, dovish Fed Chair outlook, geopolitical risks, and central bank buying.

Market Summary:

The U.S. Dollar Index (DXY) fell to a 2.25-month low on Tuesday, pressured by soft economic data, ongoing Fed liquidity injections, and expectations of a dovish Fed leadership transition. November nonfarm payrolls rose by 64,000, slightly above forecasts, but October payrolls were revised down by -105,000, while the unemployment rate climbed to a four-year high of 4.6%. Average hourly earnings slowed to +3.5% year-on-year, marking the smallest annual gain in 4.5 years. October retail sales stagnated, though ex-auto sales marginally exceeded expectations, and the December S&P manufacturing PMI fell to a five-month low of 51.8.

These developments reinforced expectations that the Fed may maintain an easing bias, particularly as it expands liquidity via a $40 billion-per-month T-bill purchase program. Political developments have added further pressure on the greenback, with President Trump signaling he will appoint a new Fed Chair in early 2026; National Economic Council Director Kevin Hassett is seen as the most dovish candidate by markets. Currency markets reflected these dynamics: EUR/USD climbed to a 2.5-month high, supported by diverging central bank policies and stronger German ZEW survey data, while USD/JPY slipped to a one-week low as the yen benefited from weak U.S. data and rising expectations of a 25-bp Bank of Japan rate hike this Friday.

Gold and silver are seeing renewed upward momentum today, with gold edging higher as traders weigh dovish Fed expectations against a still-soft dollar. The recent pullback has created a base for gold to rebound, underpinned by Fed liquidity expansion, expectations of a dovish Fed Chair, and ongoing geopolitical risks in Ukraine, the Middle East, and Venezuela. Central bank buying remains a key structural support, with the PBOC raising gold reserves for the thirteenth consecutive month and global central bank acquisitions up 28% in Q3 versus Q2. Silver similarly benefits from tight Chinese inventories, though ETF liquidation pressures continue to limit rapid upside.

Overall, the U.S. dollar, gold, and silver are trading in a landscape shaped by dovish Fed expectations, geopolitical risks, and central bank interventions. Precious metals retain structural support as safe-haven assets, with gold showing early signs of recovery, while the greenback remains sensitive to U.S. labor and inflation trends, liquidity operations, and political developments ahead of the January FOMC.

 Technical Analysis 

DXY, H4: 

The US Dollar Index has shifted into a corrective phase on the chart after failing to sustain gains above the 100.25 resistance level, which continues to act as a key supply area following repeated rejection. Price has since broken below the rising trendline support and eased back toward the 98.10 level, signaling a loss of upside momentum and a short-term bearish bias rather than a complete structural breakdown. The broader structure has weakened, but downside extension remains dependent on whether current support holds.

Momentum indicators point to weakening but potentially stabilizing conditions. The RSI has drifted lower and is now hovering in the mid-30s, reflecting persistent bearish momentum but approaching oversold territory, which may limit immediate downside. Meanwhile, the MACD remains below the signal line with a negative histogram, confirming bearish momentum, although the flattening histogram suggests downside pressure may be starting to moderate rather than accelerate.

Resistance Levels: 98.55, 99.05

Support Levels: 98.10, 97.55

GOLD, H4: 

Gold remains constructive on the chart despite the recent pullback from the 4,348–4,355 resistance zone, which continues to act as a major supply area following the earlier double-top rejection. After breaking higher from the prior consolidation structure, price has eased back toward the 4,305–4,295 region, suggesting a short-term corrective phase rather than a full trend reversal. The broader bullish structure remains intact as long as price holds above the key higher-low support at 4,175.

Momentum indicators suggest cooling but still supportive conditions. The RSI has eased back from overbought levels and is now holding in the mid-50s, indicating a healthy momentum reset rather than a bearish divergence. Meanwhile, the MACD remains in positive territory, though the histogram has turned slightly negative, reflecting slowing upside momentum without a confirmed bearish crossover at this stage.

Resistance Levels: 4,320.00, 4,350.00

Support Levels: 4,295.00, 4,280.00