ECB cuts interest rates to 2022 lows

Gold prices fell in European trade on Thursday for the first time in three days away from recent record highs amid active profit-taking, while the dollar rebounds against major rivals. 

Fed Chair Jerome Powell warned that the trade war weakens the Fed’s ability to contain inflation and support US growth, hurting the odds of a US rate cut in the first half of the year.

The Price

Gold prices fell 0.7% today to $3320 an ounce, with  a record high at $3357.

On Wednesday, gold rose 3.5%, the second profit in a row, and the largest since March 2023 as the US-China trade war escalated.

US Dollar

The dollar index rose 0.5% on Thursday against a basket of major rivals, hurting greenback-denominated gold futures.

The dollar’s rebound from three-year lows comes amid mounting doubts about a Fed interest rate cut in the first half of the year.

Powell

Fed Chair Jerome Powell said that tariffs and the ongoing trade war between the US and the world, especially China, could weaken the Fed’s ability to contain inflation and boost US growth.

Powel expects inflation to rise and growth to slow down, but it’s still not clear which one of them needs more focus amid trade uncertainty. 

Powell said the Fed is assuming a wait and see stance until the dust clears before taking a monetary policy decision.

He also expects the economy  to move away from full employment and contained inflation targets due to the impact of tariffs.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in May stood at 17%.

The odds of such a cut in June stood at a much bigger 65%.

Now traders await US unemployment claims data later today to gather more clues on the future of Fed monetary policies.