How Does the US Dollar Influence Gold Prices?

Gold has experienced significant growth over the past three years, surprising investors and analysts with record-high prices. After increasing by more than 20% in 2023 and 2024, gold has already risen over 27% in 2025, reaching an all-time high of $3,500 in April. Many attribute gold's success to global uncertainties.

However, geopolitical factors that boosted gold prices are now calming down. The impact of conflicts like Russia-Ukraine and Israel-Iran has lessened, along with trade tensions between nations. Central banks continue to buy gold, but the overall momentum has slowed.

Currently, the US dollar is emerging as a key factor influencing the gold market. The dollar's strength inversely affects gold prices. The dollar index, which measures the dollar against other currencies, plays a crucial role in this relationship. A stronger dollar leads to lower gold prices, while a weaker dollar drives investors towards gold.

The US dollar has been weakening in 2025, dropping nearly 12% and hitting a multi-year low. Various factors, including trade and currency wars, US debt levels, and Federal Reserve policies, contribute to the dollar's decline.

If the dollar continues to fall, it could impact the US economy, affecting Treasury bonds and borrowing costs. Conversely, a weaker dollar boosts gold prices, making precious metals more appealing to global buyers seeking a safe haven for their investments.

The future of gold prices depends on geopolitical events, trade dynamics, and central bank actions. As uncertainties persist, the gold market remains volatile. Investors should monitor these factors closely to navigate the gold rally effectively.

Gold price in India is currently at Rs 97,220 per ten grams of 24 karats. The time it takes to surpass the all-time high of Rs 1 lakh remains uncertain, reflecting the unpredictable nature of the gold market.

According to the source: financialexpress.com.