Gold, the US Dollar and the Fed
If you trade gold, you are also trading the US dollar, whether you like it or not. And the biggest driver of the dollar is the US Federal Reserve.
Why gold and the dollar usually move in opposite directions
Gold is priced in dollars. If the dollar rises 1% against other currencies, the same ounce of gold costs more for someone paying in euros, yen or dinars, so demand cools. Traders often watch the DXY (US Dollar Index) next to the gold chart for this reason.
How the Fed moves gold
The Fed sets US interest rates. Higher rates usually strengthen the dollar and raise bond yields, both of which tend to weigh on gold. Rate cuts, or even hints of future cuts, often lift gold.
Markets move on expectations. If everyone already expects a cut, gold can actually fall when the cut happens ("buy the rumour, sell the news"). What matters most is whether the Fed sounds more aggressive or more relaxed than expected.
Key events to watch
| Event | How often | Why it matters for gold |
|---|---|---|
| FOMC rate decision | 8 times a year | Sets rates and tone for months |
| Non-Farm Payrolls (NFP) | Monthly, first Friday | Strong jobs data can mean higher rates |
| CPI inflation | Monthly | Shapes rate expectations |
| Fed Chair speeches | Often | Hints about future decisions |
When the pattern breaks
Sometimes gold and the dollar rise together. This usually happens during a crisis, when investors buy both as safe havens. When you see this, fear is driving the market and moves can be unusually large.