The Bloomberg Dollar Spot Index has fallen about 8% this year so far. After tumbling in the wake of Donald Trump’s “Liberation Day” tariffs in April, the greenback came under sustained pressure as the president kicked off his aggressive campaign to get a dovish appointee installed as Fed chair next year.

“The biggest factor for the dollar in first quarter will be the Fed,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “And it’s not just the meetings in January and March, but who will be the Fed Chair after Jerome Powell ends his term.”  

With at least two rate reductions priced in for next year, the US’s policy path diverges from some of its developed peers, further dimming the dollar’s appeal.

The euro has surged against the greenback as benign inflation and a coming wave of European defense spending keep rate-cut bets close to zero. In Canada, Sweden and Australia, meanwhile, rates traders are wagering on hikes. 

The dollar gauge rose as much as 0.2% Wednesday after Labor Department data showed applications for US unemployment benefits fell last week to one of the lowest levels this year. The greenback index was still on track to finish December down about 1%. 

This month, a brief period of bullish positioning on the dollar reverted to the more pessimistic stance that’s dominated since the April tariffs fueled concerns about the US economy, Commodity Futures Trading Commission data for the week ending Dec. 16 show.

For now, it’s all about the Fed and who steps into replace Jerome Powell, whose term as chair is set to end in May. 

Trump recently teased that he has a preferred candidate, but is in no hurry to make an announcement — while also musing that he might fire the central bank’s current leader.

National Economic Council Director Kevin Hassett has long been seen as the leading candidate, while Trump also expressed interest in former Fed governor Kevin Warsh. Fed governors Christopher Waller and Michelle Bowman and BlackRock’s Rick Rieder are also seen as being in the running. 

“Hassett would be more or less priced in since he has been the frontrunner for some time now, but Warsh or Waller would likely not be as quick to cut, which would be better for the dollar,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc.

Spot gold hovered around $4,320 an ounce, while silver slid toward $71. The two have seen exceptional volatility in thin post-holiday trading, plunging Monday before recovering Tuesday and dropping again Wednesday. The big swings prompted exchange operator CME Group to raise margin requirements twice. 

Both metals are still on track for their best year since 1979, supported by strong demand for haven assets amid mounting geopolitical risks, and by interest-rate cuts by the US Federal Reserve. The so-called debasement trade — triggered by fears of inflation and swelling debt burdens in developed economies — has helped supercharge the scorching rally.

In gold, the bigger market by far, those factors spurred a rush by investors into bullion-backed exchange-traded funds, while central banks extended a years-long buying spree.

Gold is up about 63% this year. In September, it eclipsed an inflation-adjusted peak set 45 years ago — a time when US currency pressures, spiking inflation and an unfolding recession pushed prices to $850. This time around, the record run saw prices smash through $4,000 in early October.

“In my career, it’s unprecedented,” said John Reade, a market veteran and chief strategist at the World Gold Council. “Unprecedented by the number of new all-time highs, and unprecedented in the performance of gold exceeding the expectations of so many people by so much.”

Silver has notched up a gain of more than 140% during the year, driven by speculative buying but also by industrial demand, with the metal used extensively in electronics, solar panels and electric cars. In October, it soared to a record as tariff concerns drove imports into the US, tightening the London market and triggering a historic squeeze.

The new peak was then passed the following month as US rate cuts and speculative fervor drove prices higher, and the rally topped out above $80 earlier this week — in part reflecting elevated buying in China.

Yet the latest move swiftly reversed, with the market closing down 9% on Monday then swinging the following two days. In response to the extreme volatility, CME Group again raised margins on precious-metal futures, meaning traders must put up more cash to keep their positions open. Some speculators may be forced to shrink or exit their trades — weighing on prices.

“The key driver today is the CME raising margins for the second time in just a few days,” said Ross Norman, chief executive officer of Metals Daily, a pricing and analysis website. The higher collateral requirements are “cooling the markets off,” he said.

Platinum, Palladium

The enthusiasm for gold and silver has extended into the wider precious-metals complex in 2025, with platinum breaking out of a years-long holding pattern to hit a new high.

The metal is on course for a third annual deficit, following disruptions in major producer South Africa, and supply will likely remain tight until there’s clarity on whether the Trump administration will impose tariffs — as well as on silver.

Prices for silver, platinum and palladium all sagged on Wednesday, though there’s little sign of enthusiasm waning.

“2025’s surprise was how safe-haven metals turned into momentum trades — silver in particular,” said Charu Chanana, chief market strategist at Saxo Markets in Singapore.

Silver traded down 6% at $71.44 an ounce as of 12:28 p.m. in New York. Gold slipped 0.4% to $4,322.04 an ounce, while the Bloomberg Dollar Spot Index was up 0.1%.