Gold Falls On Stronger Dollar As Rate-Cut Bets Trimmed

Over the weekend and into Monday morning, the gold market moved from something of a bullish peak into a short-term correction. Earlier this month, gold hit fresh record highs amid elevated safe-haven demand, strong central-bank buying and high odds of U.S. rate cuts.

However, over the past few days, sentiment has shifted. The dollar has strengthened, comments from Fed officials have cooled expectations of imminent easing, and traders are reacting to reduced geopolitical anxiety, all of which have piled pressure on gold.

After such highs and lows, where is gold headed?

Note: Intervals based on available public data; not minute-by-minute.

Why Gold Went Up When It Did

Before the recent pullback, gold enjoyed a considerable rally. The key drivers were:

1. High expectations of Fed rate cuts: Earlier in October, markets had priced in very strong odds of a further cut by the Fed, which reduces the opportunity cost of holding non-yielding assets like gold.
   
2. Weakening dollar / lower yields: A weaker U.S. dollar and falling Treasury yields make gold relatively more attractive for investors.
   
3. Geopolitical/trade uncertainty & safe-haven demand: Escalating trade tensions between the U.S. and China, general global instability, and central bank purchases drove demand.
   
4. Central bank demand: The institutional buying by central banks helped underpin the rally and gave it structural support.
   

Why Has Gold Slipped?

• Stronger US Dollar
  The greenback remained firm, hovering near three-month highs, making dollar-priced gold more expensive for overseas buyers, a headwind for bullion.

• Fed Rate-Cut Outlook Dimmed
  Earlier, markets had priced in very high odds of a December rate cut. However, after recent hawkish remarks by Fed officials, the probability of a rate cut has fallen, reducing one tailwind for gold.

• Trade/Geopolitical Factors
  While trade tensions between the US and China have eased, this very improvement is reducing the ‘safe-haven’ premium for gold. Meanwhile, other assets are benefiting from risk-on sentiment.

What About Silver?

• As of 5 June 2025, spot silver rose to US$35.82 per ounce, hitting its highest level in more than 13 years.
  
• As of 22 August 2025, spot silver was down about 0.4% to US$38.01 per ounce.
  
• According to TradingEconomics, silver fell to about US$48.80 per ounce as of 3 November 2025, and is up roughly 50.47% year-on-year.
  

What Should Investors Watch Next?

• Fed’s December Policy Meeting: The key event for short-term direction is a surprise rate cut, which may re-energise gold.
  
• Dollar Strength: The US dollar's sustained gains may put additional pressure on the market gold prices.
  
• Global Trade Developments: Any reversal in U.S.–China cooperation could reignite safe-haven demand.
  
• ETF Inflows: Renewed accumulation in gold-backed funds would indicate investor confidence returning.
  

Conclusion

The recent drop in gold reflects an evolving backdrop: a stronger dollar and softer expectations of Fed easing have removed two of the key tailwinds for bullion. While gold is far from broken, it now needs fresh impetus either from policy or geopolitics to regain momentum. For investors, the central question remains whether gold will hold as a legitimate hedge or become sidelined during periods of moderate risk.

The investor's question remains: Can gold retain its strategic hedge value if US rates stay elevated for longer, or will higher yields and a resilient dollar cap further upside potential?

Reference:

The Economic Times
The Business Times
Reuters