Gold prices climbed more than 1% in European markets on Wednesday as part of a recovery from a four-week low, returning to trade once again above $3,300 per ounce, driven by bargain buying at lower levels and supported by a pause in the US dollar’s rally, in addition to increased safe-haven demand following the recent tariff announcements made by Donald Trump.
Following the Federal Reserve’s monetary policy meeting, which came in more hawkish than markets had anticipated, expectations for a US interest rate cut in September declined, and in order to reprice those expectations, markets await the release of more key data on the US labor market.
Price Overview
• Gold Prices Today: Gold rose by 1.2% to ($3,314.90), from the session’s opening level at ($3,275.61), recording a low of ($3,273.97).
• At Wednesday’s settlement, gold lost 1.5%, marking its fifth daily loss in the past six sessions, and its biggest daily drop since June 27, hitting a four-week low of $3,268.89 per ounce.
• The primary reason behind this steepest daily loss in a month was the strong rise in the US dollar in global currency markets, driven by better-than-expected US growth data and the hawkish Federal Reserve meeting.
US Dollar
The dollar index fell on Thursday by around 0.35%, retreating from a two-month high at 99.98 points, reflecting a pause in the dollar’s rise against a basket of major and minor currencies, which supports the recovery of gold and other commodities priced in the US dollar.
Apart from profit-taking, the US currency weakened as investors refrained from building new long positions ahead of the July jobs report, in addition to Trump’s announcement of new tariffs.
Trade Developments
The White House announced on Wednesday that US President “Donald Trump” signed an executive order imposing additional tariffs of 40% on Brazil, bringing the total tariff rate to 50%.
He also decided to impose a blanket 50% tariff on imports of semi-finished copper products and copper-intensive derivatives, effective August 1.
Trump also announced a 25% tariff on India, alongside an additional “penalty” against the Indian government due to its trade with Russia.
Federal Reserve
• In line with most expectations, the Federal Reserve on Wednesday left interest rates unchanged, keeping the target range between 4.25% and 4.50% for the fifth consecutive meeting.
• The Fed stated that the FOMC sees the risks of rising unemployment and inflation as still elevated, due to uncertainty surrounding the economic outlook.
• Fed Chair “Jerome Powell” said: The next steps we will take are likely to be more neutral. Powell added: I expect to see more effects from the tariffs in the inflation data.
US Rate Expectations
• Following the Fed meeting and according to the “FedWatch” tool from CME Group: the probability of a 25 basis point rate cut at the September meeting fell from 64% to 43%, while the pricing of a hold in rates rose from 34% to 57%.
• And the probability of a 25 basis point rate cut at the October meeting declined from 78% to 64%, while the pricing of a hold rose from 22% to 36%.
• Traders reduced their expectations for Fed rate cuts this year after Powell’s remarks, now projecting around 35 basis points of easing by December.
• And in order to reprice the September cut probabilities, markets are awaiting more key data on the US labor market, including weekly jobless claims and Friday’s July jobs report.
Gold Outlook
UBS analyst “Giovanni Staunovo” said: We saw some large declines in gold prices yesterday coinciding with the FOMC statement. He added: But today’s pause in the US dollar’s rise following Donald Trump’s tariff announcements supports higher gold prices.
SPDR Fund
Gold holdings in the SPDR Gold Trust, the largest gold-backed ETF in the world, declined yesterday by around 0.86 metric tons, bringing the total down to 955.37 metric tons, which marks the lowest level in a week.
