Gold prices declined in European markets on Tuesday for the first time in four sessions, retreating from a two-week high due to active correction and profit-taking, moving into negative territory under pressure from a rebound in the US dollar.
After the probability of a Federal Reserve interest rate cut in September rose, investors are now awaiting multiple economic data releases and comments from monetary policymakers to gain further insight into the likely path of US interest rates for the remainder of the year.
The Price
• Gold prices today: Gold fell by 0.25% to $3,365.79, down from the opening level of $3,373.71, after recording a session high of $3,382.49.
• At Monday’s settlement, gold prices rose by 0.35%, marking a third consecutive daily gain, and reached a two-week high of $3,385.43 per ounce, supported by declining US yields.
The US Dollar
The US Dollar Index rose by 0.35% on Tuesday, extending its gains for the second straight session, as it continued to rebound from a two-week low of 98.59 points, reflecting sustained strength in the US dollar against a basket of global currencies.
In addition to buying from lower levels, the dollar’s rebound is also supported by a pause in the decline of 10-year US Treasury yields, as markets await more evidence on the Federal Reserve’s interest rate trajectory.
US Interest Rates
• San Francisco Federal Reserve President Mary Daly stated on Monday that, given increasing evidence of weakness in the US labor market and the absence of any indication of persistent tariff-driven inflation, the time has come to cut interest rates.
• Following her remarks, CME Group’s FedWatch Tool showed that the probability of a 25-basis-point rate cut in the September meeting rose from 75% to 88%, while the likelihood of no change dropped from 25% to 12%.
• The probability of a 25-basis-point rate cut in October also increased from 95% to 97%, while the chance of no change fell from 5% to 3%.
• Traders have raised their expectations for Fed rate cuts this year after the dismal jobs data, now forecasting around 63 basis points of easing by December, up from 35 basis points previously.
• To reprice these expectations, investors await key data later today on the performance of the US services sector at the end of July.
Gold Outlook
• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Short-term bullish momentum has improved… The core narrative supporting gold prices is that the Federal Reserve still appears positioned to actually cut interest rates in September.”
• Wong added: “I still don’t expect gold to surge strongly above $3,450 per ounce unless there is a clear catalyst pushing prices to that level.”
SPDR Fund
Holdings of gold by the SPDR Gold Trust, the world’s largest gold-backed ETF, rose by approximately 1.72 metric tons on Monday, bringing the total to 954.8 metric tons — rebounding from 953.08 metric tons, the lowest level since July 21.
