Powell’s Tone Reinforces Dollar Strength, Gold Finds Relief as Yields Stabilize

Key Takeaways:

• The U.S. Dollar steadied as Powell signaled no preset path for rate cuts, reinforcing expectations of a slower easing cycle.

• Optimism over a U.S.–China tariff reduction lifted risk sentiment and trimmed the dollars safe-haven demand.

• Gold edged higher above $4,000 as yields stabilized and investors positioned ahead of next weeks U.S. inflation data.

Market Summary:

The U.S. Dollar regained traction on Thursday as markets recalibrated expectations for further monetary easing following a hawkish tilt from the Federal Reserve. Although the Fed recently delivered a 25 bps rate cut to a range of 3.75% -- 4.00%, Chair Jerome Powell emphasized that there is “no preset course for rate reductions,” stressing the need for greater confidence that inflation is on a sustainable path toward 2%. His remarks prompted traders to dial back bets on aggressive 2026 rate cuts, lifting the dollar broadly against major peers. The dollar index (DXY) hovered near 99.5, supported by rising Treasury yields and policy divergence, with USD/JPY testing fresh near-term highs as yield differentials widened.

Market sentiment, however, was mixed following President Donald Trump‘s surprise announcement of a tariff reduction on Chinese goods from 57% to 47% as part of renewed U.S.–China trade cooperation. The move signaled a thaw in bilateral relations and triggered a mild “risk-on” shift into equities and cyclical currencies. While the easing of trade tensions trimmed the dollar’s safe-haven appeal, investors continued to favor the greenback amid lingering inflation risks and the Feds cautious stance.

Gold, meanwhile, edged higher after recovering from earlier losses, supported by modest profit-taking in the dollar and short-covering ahead of next week‘s U.S. inflation data. The yellow metal managed to reclaim ground above $4,000/oz, as investors sought balance between the Fed’s hawkish rhetoric and easing geopolitical risks. Demand remained underpinned by steady central bank buying and retail interest in Asia, with the latest World Gold Council report showing global consumption rose 3% YoY in Q3 to 1,313 tonnes.

Despite the day‘s rebound, gold’s near-term trajectory remains tied to U.S. yield movements and inflation expectations. Renewed U.S. sanctions enforcement on Russian energy exports and lingering instability in Eastern Europe and Iran continue to provide a floor for prices. Traders now look to next week‘s inflation readings and Treasury yield developments for directional cues—dovish data could weaken the dollar and reinforce gold’s upside momentum, while a firm inflation print may revive yield pressure and cap gains near $4,050.