Peter Smith
⬤ Gold and the U.S. Dollar showed an unusual relationship during the latest trading session, challenging the traditional inverse correlation between the two assets. Both the Dollar Index and precious metals advanced at the same time, raising questions about the durability of the current Gold move.
⬤ The 2-hour chart highlights this divergence clearly. Historically, Gold rallies tend to depend on dollar weakness, as a stronger USD reduces demand for dollar-denominated commodities. Instead, the market witnessed both assets climbing together. This behavior suggests positioning flows or short-term liquidity effects rather than a structurally confirmed bullish breakout.
⬤ Market structure remains fragile. When the Dollar holds strength, Gold often faces selling pressure after initial spikes. Analysts have previously observed similar reactions when the USD strengthens, as seen in XAU/USD falls amid strong dollar and periods where buyers defend support but struggle to extend rallies like Gold bulls defend key support near $4050.
⬤ The current setup suggests conviction in the precious metals trend will depend heavily on dollar behavior. A meaningful decline in the Dollar Index would restore the traditional macro alignment and support sustained upside, while continued dollar strength leaves Gold vulnerable to sharp pullbacks despite recent gains.
Peter Smith
