The US dollar index is a weighted value of a basket of six major world currencies relative to the US dollar. For precious metals, the US dollar index is an important "external market" that almost daily affects prices in other markets, including precious metals. The US dollar index is also a good barometer for measuring the health of the US economy, the world's largest economy.

The US dollar index recently hit a two-year high and is showing an upward trend on the chart. In fact, the monthly chart of the US dollar index shows that prices have been on an upward trend since 2008. It is worth noting that the trend in the money market is often stronger and more persistent than the price trend in other markets. Although the upward trend of the US dollar index has matured and has a 16 year history, there are no strong early technical clues indicating that the index will soon form a major market top.

The Federal Reserve is likely to be more cautious in further lowering US interest rates in the upcoming new year, which will also benefit the bulls in the US dollar index.

The US economy may encounter problems in 2025, including the prospect of sustained price increases and/or resistance from any new trade tariffs initiated by the incoming Trump administration. However, compared to other major currencies, the US dollar may still be the 'cleanest dirty shirt in the drawer'. The US dollar still holds the title of the safest currency in the world, so any new geopolitical turbulence may also support the US dollar index.

It is expected that currency traders will continue to sell major currencies (euro, pound, Canadian dollar, Australian dollar, Japanese yen) against the US dollar and peripheral currencies in the new year.

Importantly, analysts also anticipate a less pessimistic sensitivity of the gold and silver markets to the appreciation of the US dollar in the foreign exchange market by 2025. In the long run, this phenomenon has become very evident in recent years. Just take a look at the long-term gold chart and the long-term US dollar index chart - both show an upward trend.

Monthly chart of the US dollar index