WASHINGTON, January 29, 2026
Australian Dollar Soars as Geopolitical Tensions Fuel Gold Rally
The Australian dollar is currently the strongest performer among the G10 currencies, while gold prices are nearing $5,600 amid escalating global instability.
- The US dollar showed little reaction to January’s Federal Reserve meeting, despite hawkish comments from Jerome Powell.
- Speculation persists regarding potential White House intervention to weaken the greenback.
- Geopolitical risks, particularly in the Middle East, are driving gold prices to historic highs.
- The Australian dollar is benefiting from rising inflation and a potential interest rate hike by the Reserve Bank.
The US dollar remained surprisingly unmoved following the January Federal Reserve meeting. While Chairman Jerome Powell delivered what many considered moderately hawkish remarks regarding inflation – emphasizing that a definitive victory hasn’t been achieved – investors seemed more intrigued by a dissenting vote from Christopher Waller, who favored a rate cut. This move has significantly boosted Waller’s prospects for the next Fed chair position. The probability of a monetary expansion in June dipped from 65% to 61%, though bullish sentiment ultimately resurfaced.
Markets continue to debate whether the White House has an interest in a weaker dollar. Treasury Secretary Scott Bessent attempted to reassure investors, reiterating the US commitment to a strong dollar policy. However, Bessent previously acknowledged there’s no direct correlation between the policy statement and the actual price of the US currency.
Former President Donald Trump has stated that a declining USD index enhances the competitiveness of US companies. However, today’s high-tech exports are less sensitive to currency fluctuations. Consumers prioritize factors beyond price, such as safety and reliability. Even if a weaker dollar boosts American exports, potential issues could arise within the securities market.
In 2025, the euro’s 14% surge against the dollar resulted in reduced profits for non-resident investors. Consequently, they may now hesitate to invest in what they perceive as fundamentally overvalued American stocks, potentially leading to increased hedging activity and further downward pressure on the USD index.
Treasury Secretary Bessent’s confirmation that the US did not intervene in foreign exchange markets to sell the dollar against the Japanese yen helped the yen stabilize. Conversely, the Australian dollar has climbed to three-year highs, fueled by accelerating inflation and a drop in unemployment to 4.1%. The likelihood of the Reserve Bank of Australia raising its key interest rate in February has risen to 60%, solidifying the Aussie’s position as a leading currency.
What factors are driving gold prices higher? Geopolitical tensions in the Middle East are playing a significant role. Gold has approached $5,600 per ounce, a historic high, as Donald Trump threatens military action against Iran and imposes tariffs of 25% on South Korea and 100% on Canada. Deutsche Bank analysts predict gold could reach $6,000 per ounce in 2026.
