Gold prices declined in the European market on Thursday, retreating from a three-week high, as a result of active profit-taking and corrective movements, in addition to pressure from the strengthening US dollar in the foreign exchange market.
The rise in the American currency came after President Donald Trump stated that it is “highly unlikely” he would fire Federal Reserve Chair Jerome Powell.
The Price
• Gold spot price fell by 0.65% to $3,325.29 per ounce, down from the opening level of $3,347.23, after recording an intraday high of $3,352.32.
• Upon Wednesday’s settlement, gold prices had gained 0.7%—their first rise in three sessions—reaching a three-week high of $3,377.47 per ounce, supported by a decline in the US dollar following weaker-than-expected US Producer Price Index (PPI) data.
The US Dollar
The US Dollar Index rose by 0.55% on Thursday, resuming its upward trend after a temporary pause on Wednesday. It approached a three-week high at 98.91 points, reflecting broad gains in the dollar against a basket of major and minor currencies.
President Donald Trump said on Wednesday that he does not currently plan to fire Powell but left the door open to that possibility. He also reiterated his criticism of the Fed Chair for not cutting interest rates.
US Interest Rates
• Data released on Wednesday showed a sharper-than-expected slowdown in US producer prices for June, a strong signal that consumer prices may also ease in July.
• Following the data, and according to the CME Group’s FedWatch tool: The probability of a 25 basis-point rate cut at the July meeting held steady at 2%, while the probability of holding rates steady remained high at 98%.
• For the September meeting, the probability of a 25 basis-point cut rose from 55% to 57%, while the probability of no change declined from 45% to 43%.
• According to data from the London Stock Exchange, traders are currently pricing in less than 50 basis points of cumulative rate cuts by the end of the year, with expectations for the first 25-basis-point cut in October.
• In order to reprice these expectations, investors are awaiting key economic data from the US later today, including monthly retail sales and weekly jobless claims.
Gold Outlook
• Reliance Securities senior analyst Jigar Trivedi said: “Gold slipped below $3,340 per ounce as the US dollar regained momentum following reduced uncertainty over the Fed chair’s position.”
• Trivedi added: “The flat reading of June’s US PPI indicates stable wholesale prices, suggesting that tariffs may have a smaller economic impact than initially feared.”
SPDR Gold Trust
Holdings in the SPDR Gold Trust— the world’s largest gold-backed ETF—rose by 3.15 metric tons on Wednesday, bringing the total to 950.79 metric tons, marking the highest level since June 30.
