The dollar is at its highest level in a year and gold continues its losses economy

The dollar rose today, Thursday, to its highest level in more than a year, after the US Federal Reserve’s adherence to monetary tightening led to an increase in bets on raising interest rates. The strength of the dollar and the Federal Reserve’s decision led to a decline in gold prices, declining by 0.59%.

The dollar index, which measures the performance of the US currency against a basket of currencies including the yen, euro and sterling, rose by 0.24% to 100.59 points, reaching its highest level since May 2025.
In the previous session, the index increased by 0.85%, recording the largest daily jump in more than three months.

⁠⁠Lee Hardman, a currency trading analyst at MUFG, said that “the Federal Reserve’s decision to adhere to the monetary tightening policy heralds the start of the dollar’s ​​rise.”

Monetary tightening is an economic strategy applied by central banks to limit the speed of economic growth when inflation rises beyond safe limits. This process occurs mainly by raising interest rates, which makes the cost of borrowing more expensive for individuals and companies, and thus consumer spending declines and investments shrink, which leads to a reduction in the amount of money circulating in the market and a decline in demand for goods and services.

Analyst Hardman added, “The dollar derived support from the sharp upward adjustment in US short-term interest rates… which significantly offset the negative impact of the announcement of the US-Iranian agreement at the weekend.”

Federal policy

The Federal Reserve (the central bank) kept interest rates unchanged in a range between 3.5% and 3.75% when its new president, Kevin Warsh, ushered in a new era with a comprehensive review of monetary policy. However, nearly half of policymakers currently expect to raise interest rates this year amid growing concerns about inflation.

According to data from the London Stock Exchange Group, the Federal Reserve funds futures market expects to raise interest rates by next October.

The euro fell 0.1% to $1.147, and the British pound also fell 0.35% to $1.324, bringing the two currencies to their lowest level in more than two months.

The Japanese yen fell to 160.90 to the dollar, touching the lowest level since July 2024, giving up the gains it achieved after Tokyo intervened on April 30 to support the currency. The decline of the Japanese currency again sparked a new response from the government, whose officials once again confirmed their readiness to support the currency.

In Britain, the Central Bank appears to be moving to keep interest rates unchanged at 3.75% later Thursday, as it assesses what the agreement between the United States and Iran could mean for inflation in the country.

Precious metal

Gold fell in spot transactions today by 0.59% to $4,231 per ounce after recording its lowest level since last November last week, and US gold futures contracts fell by 2.7% to settle at $4,264 per ounce.

The signing of the ceasefire agreement between the United States and Iran contributed to alleviating fears of high inflation and pushing oil prices down, which limited the yellow metal’s losses.

Peter Grant, Vice President and Chief Metals Analyst at Zaner Metals, said that the factor most influencing the price of gold was the tone that tended to tighten monetary policy from the Federal Reserve Board yesterday, Tuesday, which pushed the dollar to record its highest levels this year, which is putting pressure on gold.

As for other precious metals, the prices were as follows:

• Silver fell in spot transactions by 2% to $66.65.
• Platinum lost 1% to reach $1,718.
• Palladium lost 2.1%, recording a price of $1,285.