Dollar Hits 3-Year Low—Here's What It Means for Precious Metals

The U.S. dollar is undergoing a major technical breakdown—a highly bullish development for commodities, especially precious metals and their mining stocks.

For the past couple of months, I’ve been warning of a likely breakdown in the U.S. dollar—an event that historically signals a bullish turn for precious metals due to their well-established inverse relationship (read my recent report to learn more). That breakdown is now unfolding, as I had anticipated, and gold, silver, and mining stocks are responding favorably. In this update, I’ll break down where these assets currently stand from a technical perspective and what’s likely to come next.

In my recent dollar updates, I emphasized the importance of the 100 level on the U.S. Dollar Index—a key support that had triggered several major rallies in recent years. But that support was recently broken, shifting my bias firmly bearish. In my latest analysis, I also pointed out the 98 level as the next important support and warned that a break below it would confirm a deeper selloff. Sure enough, the index sliced through that level today, hitting a three-year low and further reinforcing the downtrend.

The U.S. dollar has weakened over the past two days, driven by several key developments. Yesterday’s benign Consumer Price Index (CPI) report was followed by a soft Producer Price Index (PPI) reading today, reinforcing the disinflationary trend. Adding to the pressure, a new report today showed that U.S. continuing jobless claims have risen to their highest level in over three years. Together, these data points increase the likelihood of upcoming interest rate cuts—further weighing on the dollar’s outlook.

The weekly chart of the U.S. Dollar Index highlights how the 100 level has served as critical support for several years, with multiple rebounds occurring off of it. However, the recent decisive break below that level has given an important bearish signal. With that breakdown now validated, the next major support lies near the 90 level—which is now my next downside target.

Zooming out to the long-term monthly chart of the U.S. Dollar Index reveals that it has been trading within a rising channel for nearly two decades. A continued move toward the key 90 level would mark a decisive breakdown from that pattern—one that is likely to open the door to even deeper declines.