Dollar is losing ground to gold as the safe-haven

Gold hits record $3,245 as Dollar Index crashes below 100 for the first time in three years. Goldman Sachs now predicts gold will reach $3,700 by 2025.

The dollar’s identity crisis

Something unthinkable is happening in global markets. The US dollar is losing its status as the world’s financial refuge.

With the Dollar Index (DXY) now below 100- its lowest point in three years- investors aren’t rushing to the greenback during market turmoil. Instead, they’re buying gold at a record pace.

Deriv expert Prakash Bhudia attributes this to more than just typical market volatility. "What we're witnessing here is the 'Triffin Dilemma' in action," Bhudia explains, referring to the paradox of the United States needing to run trade deficits to supply the world with dollars. "The tariffs fundamentally misinterpret how global flows work. The global demand for dollars keeps the currency artificially strong, naturally creating trade deficits."

Trade war impact on gold prices

The US-China trade relationship has deteriorated to levels not seen in decades. Recent events tell a dramatic story:

• US imposed massive 145% tariffs on Chinese imports
• China retaliated with 125% tariffs on American goods
• Financial markets reacted with immediate volatility

Bhudia expresses profound concern about these tariffs. "They are not only misaligned with economic realities but could trigger deeper financial instability. Reducing the trade deficit substantially risks global dollar shortages, potentially triggering international financial instability similar to the dollar funding crisis we saw in March 2020."

Investors are behaving differently this time, abandoning the dollar alongside US stocks and bonds- a triple exodus Deutsche Bank analyst George Saravelos calls “uncharted territory.” Even Stephen Miran from the White House Council of Economic Advisers acknowledged that a weaker dollar might boost competitiveness- a rare admission signalling a major policy shift.

Dollar losing safe-haven status while Europe stabilises

Amid this chaos, gold has emerged as the clear winner, reaching an unprecedented $3,245 per ounce. According to Bhudia, the recent dip in gold prices is not a failure but a "classic liquidity unwind." He explains, "In moments of stress, gold often gets sold not because it's weak but because it's liquid-essentially the ATM traders use during margin calls."

Goldman Sachs remains bullish, projecting gold to hit $3,700 per ounce by the end of 2025, with potential for $4,500 in a worst-case scenario. The drivers behind this bullish outlook include heightened recession fears, massive institutional investment in ETFs and physical gold, and aggressive central bank purchasing, particularly in Asia.

Gold vs US dollar battle for safe-haven supremacy

Amid this chaos, gold has emerged as the clear winner, reaching an unprecedented $3,245 per ounce. According to Bhudia, the recent dip in gold prices is not a failure but a "classic liquidity unwind." He explains, "In moments of stress, gold often gets sold not because it's weak but because it's liquid-essentially the ATM traders use during margin calls."

Goldman Sachs remains bullish, projecting gold to hit $3,700 per ounce by the end of 2025, with potential for $4,500 in a worst-case scenario. The drivers behind this bullish outlook include heightened recession fears, massive institutional investment in ETFs and physical gold, and aggressive central bank purchasing, particularly in Asia.

Though prices pulled back slightly after Trump moderated some tariff proposals (targeting Chinese electronics with 20% levies instead of broader measures), Goldman Sachs believes this is merely a pause in gold’s ascent. The investment giant has raised its gold forecast for the third time this year, projecting:

• $3,700 per ounce by the end of 2025 (base case)
• Potential for $4,500 per ounce in a “worst-case scenario”

What are the drivers behind this bullish outlook? According to experts, heightened recession fears tied to ongoing trade disputes, massive institutional investment in ETFs and physical gold, and aggressive purchasing by central banks, particularly across Asia.

Market calm or deeper financial transformation

While the dollar briefly recovered as markets stabilised, Bhudia warns investors to remain cautious. The recent sell-off across nearly every asset class is not merely profit-taking. Instead, Bhudia sees a deeper reassessment of markets, where previous narratives of AI-driven productivity, soft landings, and geopolitical calm have rapidly broken down.

"The recent volatility spike across traditionally uncorrelated assets- Bitcoin, gold, tech stocks-is not rotation but liquidity stress," Bhudia emphasizes. This introduces significant tail risks, widening uncertainty, and fragile investor confidence.

He highlights the potential real-economy contagion, noting that small businesses, in particular, could face severe impacts. "Some smaller firms are already freezing orders due to new customs costs. If that spills over into labor markets or retail consumption, we could see a broader economic slowdown."

Analysts like Tony Sycamore from IG, on the other hand, warn that market volatility is just beginning. Trump’s inconsistent tariff policies create perpetual uncertainty, and Gary Schlossberg at Wells Fargo Investment Institute notes that even if the dollar remains dominant by default, investor unease continues to grow.

Gold price forecast and technical analysis

Currently trading around $3,231, gold shows predominantly bullish signals on daily charts. However, technical indicators suggest potential consolidation ahead:

• RSI holding flat in overbought territory
• Prices approaching the upper Bollinger band
• Key support levels at $2,982 and $2,888 if a correction occurs
• Psychological target of $3,300 if the rally resumes

Why this shift from dollar to gold matters now

Understanding the deeper implications of this shift is critical for your financial decisions. Bhudia sees gold as essential for navigating persistent uncertainty, particularly as global central banks increasingly diversify away from the dollar.

"If protectionism escalates," Bhudia says, "gold’s role as neutral collateral in a multipolar world will only grow."

Whether you're an investor seeking portfolio protection, a trader exploring opportunities, or simply concerned about economic stability, gold's ascent signals a fundamental realignment that could redefine global markets for years.

Ready to position yourself in this changing landscape? You can speculate on Gold’s price and dollar strength with a Deriv MT5 or Deriv X account.