The U.S. dollar remained under pressure on Wednesday, extending its slide against major currencies, while gold prices surged to near-record levels as global markets anxiously await the Federal Reserve’s interest rate decision. The shift in sentiment highlights increasing demand for safe-haven assets as monetary policy, inflation expectations, and global growth all come into sharper focus.

The U.S. Dollar Index (DXY) dipped below the 101.00 level for the first time since early June, while spot gold prices soared past $3,720 per ounce, edging closer to their all-time high. These market moves reflect investor caution and shifting expectations that the Fed is poised to pivot toward a more dovish stance after a year of tightening.

Fed Expected to Cut Rates: Dollar Bears Gain Ground

Traders across global currency markets are pricing in a 25 basis point rate cut by the Federal Reserve, with futures markets showing a more than 80% probability of further easing by year-end. A dovish message from Fed Chair Jerome Powell could accelerate the dollar’s decline, especially if the central bank signals that inflation is now less of a threat than previously believed.

The euro climbed above 1.11 against the dollar, marking a 5-month high. The British pound traded near 1.33, while the Australian dollar jumped to its highest level in nearly 10 months. Even the Japanese yen, which had been under pressure throughout 2025, posted modest gains, reinforcing the broad-based weakness in the greenback.

“The market is rotating out of the dollar in anticipation of lower U.S. yields,” said a senior FX strategist at ForexFlash. “If Powell confirms a series of cuts ahead, the dollar could face a deeper structural correction, especially against higher-yielding or undervalued currencies.”

Gold Finds Strong Tailwinds as Real Yields Decline

Gold has been one of the primary beneficiaries of dollar weakness and falling real yields. The benchmark 10-year U.S. Treasury yield dropped below 3.9% for the first time in two months, while inflation-protected securities (TIPS) yields also retreated — giving a green light to gold buyers looking for protection against economic volatility and weakening fiat currencies.

“Gold is acting as both an inflation hedge and a risk-off asset right now,” said ForexFlash commodities analyst Elena Vos. “It’s benefiting from falling real rates, geopolitical risk, and growing concerns about the sustainability of U.S. fiscal deficits.”

Strong physical demand from Asia, particularly India and China, is also helping to support prices. Central bank purchases remain robust, especially among emerging markets, as global institutions continue diversifying reserves away from the dollar.

Risk Assets Stall as Safe Havens Shine

While gold and forex markets are seeing clear direction, risk assets such as equities and high-yield bonds are trading more cautiously. Investors are unwilling to commit ahead of the Fed’s policy statement and dot plot release. Volatility measures in both bond and equity markets have ticked higher in anticipation of a potentially market-moving event.

Commodities broadly are mixed. While gold is soaring, silver and platinum have seen only modest gains. Industrial metals like copper and aluminum have been range-bound due to ongoing concerns about global manufacturing demand.

Bitcoin and other crypto assets have also caught some safe-haven flows, though their performance remains highly volatile and decoupled from traditional inflation hedges.

Outlook: Will the Fed Cement the Gold Rally?

Much now hinges on the language used by the Federal Reserve. A clear signal that rate cuts will continue into 2026 could push the dollar even lower and provide further upside for gold, potentially breaching its all-time highs.

However, if Powell emphasizes inflation risks or provides a hawkish pause rather than a full pivot, the dollar could stage a rebound, and gold might face near-term selling pressure.

Regardless, macro uncertainty, persistent geopolitical tension, and long-term U.S. debt sustainability concerns continue to build a solid structural case for gold as a core portfolio hedge.

Summary

The U.S. dollar is under sustained selling pressure while gold prices rally sharply, reflecting market expectations that the Federal Reserve is about to ease monetary policy. With the dollar losing strength and real yields falling, investors are turning to traditional safe-haven assets as a hedge against inflation, volatility, and global uncertainty.