Gold Prices Surge 13% as Dollar Weakens

International gold prices have surged to $3,370 per ounce, marking a significant milestone in the ongoing bullish trend for the precious metal. This surge comes as the U.S. dollar credit system faces increasing pressure, reinforcing the logic behind gold's bullish outlook. The recent price movement highlights a strong negative correlation between gold prices and the U.S. dollar index, with gold prices rising as the dollar weakens.

Despite an initial sell-off due to liquidity issues when reciprocal tariffs were first implemented, gold prices have since rebounded. The precious metal has experienced a 13% increase from its recent low point, driven by market concerns over the U.S. dollar's credit system and the potential for further de-dollarization. The weakening of the dollar's credit system has led to a large-scale panic sell-off of U.S. Treasuries and a significant decline in the dollar index, providing support for gold prices.

Analysts point out that the unpredictable nature of tariff policies has eroded market confidence in U.S. dollar assets, leading to a systemic trust crisis. This has resulted in a more pronounced inverse relationship between gold prices and the dollar index, with gold prices moving in the opposite direction of the dollar on a daily basis. The fiscal deficit and trade imbalance, which are characteristic of the dollar as the world's reserve currency, have contributed to the dollar's overvaluation relative to its gold content. However, the tariff policies aimed at addressing these issues have disrupted the dollar's circulation system, drawing attention to the underlying gold content and creating potential for further declines in the dollar index.

The impact of tariffs is expected to accelerate the process of de-dollarization, exacerbating the cracks in the dollar's hegemony and increasing the credit risk associated with the dollar. As a widely accepted global payment method, gold is poised to benefit from this shift, providing strong support for gold prices. The weakening of the dollar's credit system has also led to declines in dollar-denominated assets, including U.S. Treasuries and equities. Federal Reserve Chairman Jerome Powell has warned that the administration's tariff policies could force the Fed to choose between controlling inflation and supporting economic growth, adding to the uncertainty surrounding the future direction of monetary policy.

Looking ahead, the outlook for gold prices remains bullish, with analysts predicting that the precious metal will continue to benefit from the weakening of the dollar's credit system and the ongoing process of de-dollarization. While short-term price movements may be influenced by the Fed's policy decisions, the long-term fundamentals supporting gold prices are expected to remain intact. The disruption of the dollar's circulation system is likely to further enhance gold's monetary attributes, reinforcing the bullish outlook for the precious metal. Compared to previous bull markets, the current gold rally has seen a more muted correction, indicating a stronger underlying trend.