Not the time for dollar buyers to get cold feet - Credit Agricole

Credit Agricole notes that a lot of the negatives surrounding the US dollar are now priced into the currency already. And given the circumstances in play, that provides a scope for the greenback to rebound in perhaps the coming three to six months period.

The firm argues that despite upgrading their forecast for gold this year, they believe that dollar bulls should not "throw in the towel just yet". For some context, Credit Agricole was out last week with this note on gold:

"We mark to market our XAU forecasts and expect gold to remain above USD5,000/oz in H126. We doubt that the current pace of gains would be sustained, however, and think further that the gold rally could start running out of steam in H226."

"In particular: We expect that, like 2025, global geopolitical and US political risks could start to fade while the ‘sell America trade’ could ultimately fail to materialise as the year progresses. In turn, this could help the USD stabilise vs XAU in H226."

Adding that they see gold at $5,100 in Q4 2026 and then $5,500 in Q4 2027.

Circling back to the dollar, the firm says that:

"The “Sell America” trade has recently grown into a full-blown USD crisis that poses some risks to our above-consensus outlook for the currency. We have upgraded our gold forecasts as a result but believe that it is too early for the USD bulls to throw in the towel just yet. This is because, like in 2025: (1) the “sell America” trade has already gone into reverse; (2) US government shutdown risks need not last; and (3) growing geopolitical risks centred around Iran could boost the safe-haven appeal of the USD."

"Our historic analysis further suggests that the USD’s path since the 2024 election has been similar to its evolution after President Donald Trump’s 2016 election win. Using Trump 1.0 as a template would also signal that many negatives are in the USD price and that a rebound could be on the cards in the next three to six months."