USD’s Optimistic Words – Implications for Gold

Published on Aug 27, 2025

Investorideas.com (www.investorideas.com
Newswire)
I previously wrote
that given the dovish Jackson Hole surprise, the markets could rally
briefly and then the decline could start / continue.

“If Powell is more dovish – emphasizing the need to stimulate growth etc. – we
might get very short-term rally in gold (and a decline in the USD)
that would be followed by declines in gold and a big rally in the
USD Index anyway. Why? Because this is what the market is
expecting to hear, anyway – attributing 73.5% chance to a
September rate cut.”

This is the scenario that was realized. Powell said little, but the
subtle hints that he made were taken as a sign that the door to
lower rates is open, and markets reacted.

Echoes of 2011: Strength Nears Its End

And indeed, we saw a very short-term rally. The move was
quite emotional, but… if you look at it from the broader point of view,
you’ll notice that it was only the mining stock charts where we
saw technical changes – and that those changes were still in
tune with what happened in 2011.

What we see today are signs that the markets are already moving back
down after this short-term rally.

The GDXJ is down, and the USD Index is up, and you can see both on the
below chart.

The rising resistance line stopped the GDXJ’s rally, and this
might have marked the end of its
exceptional rally

At the same time, the USD Index confirmed that the 98 level is a solid
base, from which it’s ready to move higher – likely
much higher.

My yesterday’s comments
on the time aspect of the current outperformance in mining stocks
remain up-to-date – perhaps the history has just rhymed:

(…) it’s about the length of the period where mining
stocks were “strong” vs. gold and USD index at their
2011 top.

For three weeks – 15 trading days – miners were moving
higher despite the move up in the USD Index. That’s how long
the irrational strength persisted. This was all erased in a single
session, which was then followed by even more declines that erased
weeks of gains in a matter of days.

What’s going on right now?

Right now, it’s more difficult to pinpoint the exact day when
miners’ ‘strength’ started, as the USD Index is
not in a clear uptrend (yet) – it’s moving back and
forth with higher short-term lows.

It’s obvious that miners have been strong since Aug. 20, and
to a smaller extent they were also strong relative to the USD Index
since Aug. 8. Finally, while it’s less clear,it’s also true to say that the GDXJ has been strong since
the beginning of the month (precisely: Aug. 5)as that’s when the GDXJ started to rally much more than it
made sense given USD’s performance.

Guess what – Aug. 5 was 15 trading days ago.

This means that miners have not broken their link to 2011 – they are in perfect tune
with it.

The history doesn’t have to repeat itself to the letter, but
it does tend to rhyme.This means that miners can slide right away here, or it might
take several more days before they slide. But either way, it looks
like the end of this rally is at hand.

I also emphasized that the breakdown in the USD Index is already
verified.

Gold futures moved above the rising resistance line yesterday –
I mean the one based on intraday lows – and they moved back to
it today. Will this breakout hold? In my view, it’s about to be
invalidated, just like the move above the 78.6%
Fibonacci retracement
(just as all the other attempts to move above this retracement were
invalidated).

Plus, the resistance line based on the daily closing prices held.

Dollar Sentiment Turns the Corner

Also, I’d like to get back to the following paragraph that I
wrote yesterday:

“USD’s comeback after declining to its previous lows
also says that we should brace ourselves for a bigger rally in it.
After all, the Fed just became dovish, Trump continues to pressure
it and… the USD Index still held up well – and gold
failed to rally above its resistance line.

It looks like all the positive surprises for the precious metals
market are already behind us. The price got all the boosts, and
its value is therefore high NOW. Again, it’s high now based
on all this – those are not factors pointing to further
increases. It’s all already priced in. The same goes for the
rate cut.”

It seems that all the negative surprises for the USD are already
behind us, and that the sentiment for the USD hit the absolute worst.
This means that it’s very likely that things will get better for
it. That’s exactly what the
fundamentals
– including tariffs – suggest.

And when that happens, gold, commodities and mining stock prices are
likely to slide.

Thank you for reading today’s analysis – I appreciate that
you took the time to dig deeper and that you read the entire piece. If
you’d like to get more (and extra details not available to 99%
investors), I invite you to stay updated with our free analyses -
sign up for our free gold newsletter now.

Thank you.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief

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