Dollar's Rebound Fizzles as Fed Pressure Mounts

The US dollar's recent recovery has been short-lived as renewed pressure from the White House on the Federal Reserve has eroded confidence in the currency. This, combined with strong inflation data and rising Treasury yields, is causing investors to shift their focus towards safe-haven assets like gold and Bitcoin.

Inflation data for July showed a 3.7% year-over-year increase in the Personal Consumption Expenditure Price Index (PCE), while core PCE stood at 3.3% y/y, both significantly above the 2% target. As a result, derivatives have priced in a 40% chance of a Fed rate hike in September.

Natixis has raised its gold price forecast for the end of 2026 from $4,600 to $5,000 per ounce, citing the metal's ability to capitalize on the US dollar's inability to benefit from high Treasury yields. State Street Investment Management's SPDR Gold Shares ETF saw a massive inflow of $3.4 billion over the past five days, with gold- and Bitcoin-focused ETFs attracting around $7 billion in total.