Dollar's Tentative Turn Threatens Gold's Bull Run

Gold prices have been on a tear lately, hitting fresh multi-month highs in Asian trade due to a weakening US dollar. However, signs that the dollar may be trying to bottom out ahead of an expected fiscal update from Treasury Secretary Scott Bessent could be bad news for gold bulls.

The correlation between gold and other assets, such as silver, copper, and Bitcoin, has been strong in recent days, with correlations reaching +0.93 and +0.90 with silver and copper respectively. This suggests that the current price action is driven by broad dollar weakness rather than fluctuations in Treasury yields.

The technical picture for gold remains bullish, with the price breaking above its longer-term downtrend in July and staging a dramatic breakout of the wedge structure it had been coiling within for several months. However, the strong inverse relationship between gold and the US dollar index (DXY) combined with tentative signs that DXY is trying to bottom out, warns that the risk of a near-term reversal in gold is starting to build.