Dollar Down, Gold Up: Why Precious Metals Are Poised for a Major Rally


As the US Dollar softens and the Fed prepares rate cuts, gold, silver, and platinum are set for a major rally. See why dollar weakness and lower real yields could push gold past $5,000/oz by 2026.
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 October 19, 2025

If the US dollar continues to decline relative to other major currencies in the coming year, precious metals prices—especially gold, silver, and platinum—are likely to rise. This is due to a strong inverse relationship between the dollar and these metals, combined with investor demand for hedges against currency risk.

Because precious metals are priced globally in US dollars, a weaker dollar makes metals cheaper for buyers using other currencies, increasing demand and pushing prices higher. Historically, a 1% drop in the US Dollar Index corresponds with a 0.3 to 0.7% increase in metal prices, with gold showing particularly strong sensitivity to dollar moves.

Gold is uniquely positioned to benefit during dollar weakness for several reasons: it is seen as both a monetary asset and commodity; it becomes a more appealing store of value during inflation or economic uncertainty; and central banks tend to boost gold reserves when currency volatility rises. Additionally, lower real interest rates often accompany a weakening dollar, further enhancing gold’s allure.

As of October 2025, gold prices have surpassed US$4,300/oz, with major institutions like Bank of America and JPMorgan projecting further gains to between US$4,500 and US$5,000 per ounce by 2026 if the dollar continues declining. Silver has similarly outpaced inflation hedging demand, rising over 2% weekly in recent months.

The Federal Reserve’s interest rate policy strongly affects this dynamic. Rate hikes usually strengthen the dollar and dampen precious metal demand, while rate cuts or dovish guidance weaken the currency and boost metals. Current market expectations foresee rate reductions from the 4.25–4.50% range in 2025, sustaining upward momentum for metals into 2026. Historically, easing cycles follow the pattern: lower Fed rates lead to a weaker dollar, lower real yields, and higher gold and silver demand—reflecting investors' flight to non-yielding tangible assets when currency confidence falters.

If the Fed cuts its benchmark rate to around 3% in 2026, gold prices are expected to continue their upward trajectory, driven by lower real yields, a softer dollar, and ongoing fiscal deficits. Median forecasts range between US$4,400 and US$5,000 per ounce, with bullish scenarios projecting prices as high as US$6,000 depending on economic and geopolitical risks.

Lower interest rates reduce the opportunity cost of holding gold since it pays no yield. As returns on Treasury and savings dips, gold becomes relatively more attractive. Additionally, weaker US rates tend to drag down the dollar index (DXY), lifting gold further because it is priced in USD and thus cheaper for foreign buyers.

Historical data from major Fed easing cycles highlight this effect: during 2000–2003, gold rose about 43% as rates fell near 1%; the 2007–2009 financial crisis saw gold jump over 50% as rates dropped close to zero; and aggressive Fed cuts in 2019–2020 led to a roughly 35% increase in gold prices.

Broader macroeconomic trends reinforce these moves. A weakening dollar often signals economic instability, prompting investors to seek safe havens. Factors such as US fiscal deficits, lower interest rate expectations, and geopolitical uncertainties maintain robust demand for precious metals as defensive holdings.

In summary, sustained dollar weakness coupled with Fed easing in 2026 is likely to push gold, silver, and platinum prices higher, driven by purchasing power effects and heightened investor shifts toward tangible assets. While short-term corrections are possible, the overall outlook for precious metals remains strongly positive in this environment.

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For information only and not a recommendation to buy or sell shares.

Mining News: www.minestockers.com (Disclosure-the writer is a shareholder of minestockers.com)


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