The Relentless Dollar Rally is Slamming All Metals

The U.S. dollar's sharp 6.5% surge since early October is putting significant pressure on metal prices. However, understanding this key information could provide insight into when the tide may turn.

The U.S. dollar shares a well-established inverse relationship with commodity prices, including gold and silver. Many price movements in commodities are driven not by their underlying fundamentals but by fluctuations in the dollar's exchange rate against other currencies. 

This makes it crucial to understand this phenomenon and closely monitor the dollar's performance. Over the past month, the U.S. dollar has been in a relentless uptrend, which is the primary factor behind gold and silver's recent struggles. 

Let’s dive into the key facts to gauge where gold and silver might be headed next.

The U.S. Dollar Index, a widely followed measure of the dollar’s performance against global currencies, is the most effective indicator for tracking its movement. After a period of summer weakness, the index has staged a surprising rally since early October. It has climbed in 22 of the past 33 trading sessions, soaring 6.5%. 

While such a gain might seem modest for a volatile asset like a stock, it represents a significant move for a currency. 

Various factors have been cited for the dollar’s strength, including reduced expectations for interest rate cuts and, more recently, Donald Trump’s election victory. However, much of the rally appears to be driven by technical factors.

After such a sharp rally, the U.S. Dollar Index is now overbought and vulnerable to a potential pullback. It currently sits just below the critical resistance zone of 106 to 107, which has acted as a ceiling over the past few years. 

A decisive close above this zone would likely signal continued dollar strength, putting additional pressure on commodities like gold and silver. 

On the other hand, if the dollar fails to break through and begins to retreat, it should provide relief for commodities, allowing for a rebound. I’m closely monitoring how the U.S. Dollar Index behaves at this pivotal level.

Similarly to the U.S. dollar's rally, U.S. Treasury bond yields have been surging, putting further pressure on gold and silver prices. 

Since gold and silver don't generate any yield (and that’s perfectly acceptable for crisis hedges), rising interest rates often drive investors toward higher-yielding assets, weighing on precious metals. 

Currently, the 10-year Treasury note yield is testing a key overhead downtrend line. A decisive close above this level could signal further yield increases, while a pullback may provide some relief for gold and silver. This critical juncture warrants close attention.

Gold has continued its pullback, a trend that began in early November. As I noted on November 6th, I had shifted to a defensive stance in the short term—applying specifically to futures trading and mining shares (due to their high-risk nature), not long-term bullion holdings. 

Yesterday, gold closed below the $2,600 support level in COMEX futures and broke its uptrend line, reinforcing the need for a cautious approach. The next major support level I’m watching is $2,500 in COMEX gold futures. 

However, while gold's break below $2,600 and the uptrend line signals a short-term trend change, it doesn’t necessarily mean a steep decline is imminent. Instead, gold could move sideways for some time before resuming its long-term bull market trajectory.

Like gold, silver has also been retreating since early November. Despite this, silver remains in a confirmed uptrend and is still up nearly 40% for the year. 

I still maintain my overall optimism toward silver, and I’m closely watching for another breakout attempt above the critical $32 to $33 resistance zone. For now, patience is key as we wait for the next move.

Gold and silver weren’t the only metals impacted by the dollar’s relentless rally—copper has also faced downward pressure. Since copper plays a significant role in influencing silver prices, its movements are worth paying close attention to. 

Copper is now approaching the critical $4 support level, and I’m watching closely to see if it can stabilize and eventually rebound. A bounce at this level would provide much-needed support for silver as well.

Although platinum prices gained momentum in October, drawing increased attention from investors, they were ultimately slammed by the strength of the U.S. dollar.

Similarly, palladium surged in late October following U.S. discussions of potential sanctions on Russian exports, but its rally was quickly crushed by the strength of the U.S. dollar.

The bottom line is that a flurry of news continues to unfold as investors assess the implications of Trump’s election victory, along with the policies his team is shaping and the key appointments to his Cabinet. This uncertainty is a major driver of market volatility. 

Meanwhile, risk assets like equities and cryptocurrencies have surged since Trump’s win, likely drawing capital away from traditional safe-haven assets and into more speculative opportunities.

As I’ve emphasized before—and will continue to emphasize—the fundamental, long-term bullish case for gold and silver remains intact. 

The U.S. faces an enormous debt burden built over decades, which no single president can resolve. 

This issue isn’t unique to the U.S.; nearly every major global economy is similarly mired in debt, a challenge well beyond the influence of future President Donald Trump. These deep-rooted fiscal and monetary challenges only bolster the long-term case for holding precious metals.

Regarding my approach to precious metals investing, I maintain a core, long-term position in physical gold and silver bullion, accumulated at significantly lower prices, which I intend to hold through the global financial reset I foresee. 

I believe gold will rise above $15,000 per ounce, with silver reaching several hundred dollars per ounce.

Despite whatever fluctuations may occur, I have no plans to sell my core bullion position anytime soon. As I recently pointed out, every epic bull market—whether in the S&P 500, Bitcoin, Nvidia, or Apple—has experienced periods of pullbacks and even full-blown bear markets along the way. 

Investors who allowed themselves to be shaken out during these downturns often missed out on the extraordinary long-term gains. Gold and silver are no exceptions to this pattern.

I don’t claim to have a crystal ball or the ability to foresee every move; instead, I simply react to what the market communicates in real-time. I believe that this disciplined approach is the best way to navigate the complexities of financial markets.