Why Gold Shines Amid a Strong Dollar and Rising Yields

Gold Futures Rally Amid Fiscal Concerns and Safe-Haven Demand

Gold futures are trading 1.9% higher so far in 2025, with prices reaching a four-week high on Thursday. This surge comes despite typically adverse conditions, including a stronger U.S. dollar and rising Treasury yields, as investors seek refuge from growing fiscal uncertainties.

“Dollar strength, rising Treasury yields, and climbing gold prices all reflect global concerns about the U.S. fiscal situation,” said Brien Lundin, editor of Gold Newsletter. He emphasized that “bond vigilantes” are pushing for higher returns as U.S. debt and deficits reach historically high levels relative to GDP.

The yield on the 10-year Treasury has risen sharply, up 1.07 percentage points from its 52-week low of 3.622% in September to 4.704% as of Wednesday. Meanwhile, the ICE U.S. Dollar Index (DXY) has edged 0.6% higher year-to-date, reflecting continued strength. Despite these headwinds, February gold futures advanced $18.40 (0.7%) on Thursday, settling at $2,690.80 per ounce—the highest close since December 12.

Lundin highlighted that gold’s resilience against rising yields and a strong dollar showcases its unique role as a safe-haven asset. “Gold remains the ultimate safe haven, attracting buyers ranging from central banks to individual investors,” he noted.

Typically, a stronger dollar and higher Treasury yields put downward pressure on gold, as they make the metal more expensive for holders of other currencies and increase the opportunity cost of holding non-yielding assets. However, ongoing fiscal worries and the Federal Reserve’s struggles to maintain control over rates have heightened gold’s appeal.

Despite these challenges, Lundin believes gold’s strong performance is likely to persist, reinforcing its enduring value during times of economic uncertainty.