Gold tops $2,100, hits all-time highs amid strong US dollar and rates

Data current as of 3/4/2024

Key points

• Gold could close at all-time high: (1:37)
• US dollar hasn’t backed down: (4:03)
• Interest rates bounce back: (5:02)
• Gold and US rates typically inverse: (6:01)
• What’s next for dollar if rates reverse?: (8:16)

Gold could close at all-time high

Gold futures above $2,125 intraday would mark the highest daily close in the market’s history. This milestone demonstrates gold’s enduring appeal as a safe-haven asset, especially during times of economic uncertainty. However, other assets like US dollar and interest rates are not reacting to these all-time highs as they have historically.

US dollar hasn’t backed down

USD continues to trade above 150.00 against the yen after a brief slide under 149.50 last week. Despite fluctuations, the dollar maintains its strength, showcasing resilience in the forex market. This could indicate sustained investor confidence in the US economy or a preference for the dollar's stability compared to other currencies.

Interest rates bounce back

After a downturn last week, 10-year Treasury yields are back above 4.2% to start the week. This rebound suggests a return of investor confidence in the growth potential of the US economy; higher yields often imply expectations of strong economic performance or an anticipation of inflation, driving bond prices down and yields up. Recent stronger-than-expected CPI inflation data from January gave traders reason to believe rates may stay higher for longer in the US.

Gold and US rates typically inverse

Gold, a non-interest-bearing asset, tends to rise when interest rates are low, and vice versa. This inverse relationship highlights gold’s role as a store of value: theoretically, when yields on interest-bearing investments fall, gold becomes more attractive by comparison, pushing its price up as investors seek alternative places to park their capital. This historical line of reasoning makes the current US rate environment interesting, given the high price of gold.

What’s next for dollar if rates reverse?

Historically, USD has a lot to lose against the Japanese yen and other major currencies if the dollar begins to slide. Even though USD/JPY has been comfortable around 150.00, lows for the pair in 2023 were below 130.00. A decline in US rates typically diminishes the dollar’s appeal, as lower interest earnings make other currencies or assets more attractive. Consequently, any significant shifts in US monetary policy could impact the dollar's valuation on the global stage, affecting forex trading strategies.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.