The Dollar dips and the precious metal rally falters

The Dollar dips and the precious metal rally falters

12 Feb 2026

President Trump’s erratic policymaking left the US Dollar, the global economy’s dominant currency, losing further ground. A precious metals rally came to an abrupt halt after Trump announced Kevin Warsh as his Federal Reserve Chair nomination, widely regarded as a safe pick.

Read our latest Investment News for a market round up and the key developments shaping UK investments.

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Donald Trump has intensified pressure on Denmark over control of Greenland, in a bid to increase national security for the US. Tensions peaked when Trump initially refused to rule out a military takeover of Greenland. Threats translated into tariffs imposed on NATO countries that opposed his ambitions, but by the end of the month the threat of tariffs was removed altogether. An American warship has also been deployed close to Iranian waters after a violent crackdown of protests that erupted in Iran amidst a wealth of economic issues for the country. Brent crude oil rose 4% to around $70 a barrel as the month came to a close.

The US Dollar has subsequently slipped to a four-year low, causing investors to rotate out of US stocks and look elsewhere for higher returns. Emerging market equities benefitted, outperforming developed markets in Sterling terms. The end of US exceptionalism has been widely debated in recent months, and the record highs of precious metals have only strengthened the argument. A mounting sense of unpredictability and concern over President Trump’s actions had sent investors piling into gold, silver and copper, continuing well into January. Gold topped out at $5,600 per troy ounce in January but news of the President’s nomination for the next Federal Reserve (Fed) Chair sent gold prices falling back by 11% in a single day. Silver and platinum also fell 26% and 18% respectively. However, even with these losses, given the gains early in the month, all three metals ended the month higher than they started it.

The nomination of Kevin Warsh as Federal Reserve Chair has been perceived by markets to be a relatively safe choice. His hawkish views help to temper concerns that the central bank will inherit a Trump stooge. The nomination comes after incumbent Chair, Jerome Powell, revealed in January that he had been subpoenaed by the US Department of Justice, accused of misleading Congress over renovations of the Fed headquarters. The action against him was met with widespread disdain from US politicians and other Central Bank leaders. The Fed held borrowing costs at a range of 3.5% to 3.75% in January, signalling a “wait and see” approach given improving jobs market data and economic growth. Markets continue to price in two quarter point rate cuts in 2026, beginning in the summer.

Long term government borrowing costs rose to 4% for the first time in Japan, ahead of the snap election in early February. With the victory now confirmed for Prime Minister Takaichi, she will be able to implement her $135bn fiscal spending plan alongside her freeze on food tax. Yield rises reflect investor concerns over fears of high government debt.

Corporate bond issuance in the US saw its busiest week since the Covid-19 pandemic in January, amounting to $95bn across 55 investment grade bond deals in the first week of the new year. Increased appetite for AI spending and a wave of mergers have been the main drivers. Investment grade credit spreads in the US are now at their lowest level since 1998 – just 0.7% higher than US government debt. UK credit spreads also remain incredibly tight. In contrast, high yield spreads stepped up towards the end of the month leading to negative performance. Long dated nominal gilt yields rose slightly over the month, as did long term UK inflation expectations, leading to a slight fall in real yields over the month. The UK government published the draft Leasehold and Commonhold Reform Bill which proposes a cap on residential ground rents. This represents a significant likely loss of ground rent income and will materially affect the value of these UK property investments.

The aggregate funding level of UK DB pension schemes on low risk basis continues to be resilient. Positive performance for growth assets combined with rising yields offset the effect of rising inflation expectations over January.

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For further information, please get in touch with Hannah McCann or speak to your usual XPS Group contact.

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