Gold prices fell in European trading on Friday, extending losses for a second consecutive session and moving further away from their all-time highs, amid accelerating corrective moves and profit-taking, and under pressure from the US dollar entering a recovery phase against a basket of global currencies.

Despite the current pullback, gold remains on track to post its largest monthly gain since January 1980, supported by rising investor demand for safe-haven assets amid persistent and escalating global geopolitical and economic tensions, alongside renewed concerns over US assets.

Price Overview

• Gold prices today: Gold fell by around 5.0% to $5,112.57, from an opening level of $5,378.25, after touching an intraday high of $5,451.02.

• At Thursday’s settlement, the precious metal lost 0.7%, marking its first daily decline in nine sessions, due to corrective moves and profit-taking after earlier hitting a record high of $5,598.13 per ounce.

US Dollar

The US dollar index rose 0.6% on Friday, extending a short-term recovery from a four-year low, reflecting continued strength in the US currency against a basket of major and secondary currencies.

The dollar’s rebound was supported by comments from US President Donald Trump regarding the imminent announcement of his nominee for Federal Reserve chair, alongside optimism that a looming US government shutdown could be avoided.

Trump said he intends to reveal the name of the candidate to succeed Federal Reserve Chair Jerome Powell later on Friday, following reports that former Fed Governor Kevin Warsh had visited the White House. This fueled market expectations of a more hawkish appointment, providing additional support to the dollar.

US Treasury Secretary Scott Bessent denied reports on Wednesday suggesting that the United States might intervene in currency markets, amid speculation surrounding intervention in the Japanese yen and the dollar’s slide to multi-year lows.

Bessent said the United States has long pursued a strong-dollar policy, adding that such a policy is built on sound fundamentals. He noted that if policies are sound, capital will flow in, and that efforts to reduce the trade deficit would naturally support a stronger dollar over time.

Federal Reserve

• At the conclusion of its first regular policy meeting of the year, and in line with most expectations, the Federal Reserve on Wednesday left interest rates unchanged at the 3.50%–3.75% range, the lowest level since September 2022.

• The decision was not unanimous, with the Federal Open Market Committee voting 10–2, as two members, Stephen Miran and Christopher Waller, dissented in favor of an additional 25-basis-point cut.

• The Fed said available indicators show economic activity continuing to expand at a steady pace, noting that inflation remains somewhat elevated and that labor market indicators point to relative stability.

• Fed Chair Jerome Powell said current monetary policy is appropriate, adding that policymakers are well positioned to determine the timing and extent of any further adjustments to interest rates.

US Interest Rate Expectations

• Following the meeting, and according to the CME FedWatch Tool, market pricing for holding rates steady in March rose from 82% to 88%, while the probability of a 25-basis-point cut fell from 18% to 12%.

• Investors continue to price in two rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• Investors are closely watching upcoming US economic data, along with comments from Federal Reserve officials, to reassess these expectations.

Gold Outlook

Tim Waterer, chief market analyst at KCM Trade, said that the prospect of appointing a less dovish Federal Reserve chair, the rebound in the dollar, and gold entering overbought territory all contributed to the recent pullback in prices.

Matt Simpson, senior analyst at StoneX, said that speculation around Kevin Warsh potentially becoming Fed chair weighed on gold during Asian trading.

Monthly Performance

• Over January trading, which officially concludes at today’s settlement, gold prices are up around 20%, on track for a sixth consecutive monthly gain and the strongest monthly performance since January 1980.

• This outsized monthly gain, the largest in nearly half a century, is attributed to heavy buying by central banks, institutions, and individual investors seeking gold as the preferred alternative investment, amid intensifying global geopolitical and economic tensions and renewed concerns over US assets due to Trump’s volatile policy stance.

SPDR Gold Trust

• Gold holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 0.85 metric tons on Thursday, bringing total holdings down to 1,086.53 metric tons, retreating from 1,087.38 tons, the highest level since May 3, 2022.

The euro retreated in European trading on Friday against a basket of global currencies, resuming its losses versus the US dollar and moving away from a five-year high, amid renewed corrective moves and profit-taking, and under pressure from warnings issued by European monetary authorities over the euro’s excessive appreciation.

The euro’s rise above the $1.20 level earlier this week raised concerns among policymakers at the European Central Bank, who warned that a rapid strengthening of the currency could generate deflationary effects.

Despite the current pullback, the single European currency is on track to post its third consecutive monthly gain, supported by a broad selloff in US assets and following the historic trade agreement between the European Union and India.

Price Overview

• Euro exchange rate today: The euro fell against the dollar by 0.65% to $1.1865, from an opening level of $1.1971, after touching an intraday high of $1.1975.

• The euro ended Thursday up 0.15% against the dollar, after losing 0.7% the previous day amid corrective moves and profit-taking from a five-year high at $1.2082.

European Monetary Authorities

The euro’s move above the $1.20 threshold for the first time in five years has raised concerns among European monetary authorities, prompting ECB policymakers to issue a series of cautionary statements regarding the impact of a strong currency on inflation dynamics and economic growth.

Economists noted that euro strength could amplify the deflationary impact of strong Chinese exports, potentially pushing the ECB out of its “comfort zone” and forcing it toward further interest rate cuts.

Jeff Yu, EMEA macro strategist at Bank of New York, said that while the euro-dollar exchange rate last year remained well above the ECB’s baseline scenario without triggering strong deflationary risks, trade-related uncertainty remains elevated.

Ray Attrill, head of FX strategy at National Australia Bank, said he believes ECB remarks are independent, but noted that the $1.20 level appears to have acted as a clear trigger point.

Attrill added that the euro–dollar move, which until recently had not appeared particularly strong, arguably masks broader strength in the euro, which in turn feeds back into the ECB’s inflation outlook.

Monthly Performance

Over January trading, which officially concludes at today’s settlement, the single European currency is up more than 1.5% against the US dollar, putting it on course for a third straight monthly gain.

European Interest Rates

• ECB Executive Board member Isabel Schnabel said on Wednesday that monetary policy is “in a good place,” and that interest rates are expected to remain at current levels for an extended period, with financial markets pricing stability through early 2027.

• Money market pricing for a 25-basis-point rate cut by the ECB in February currently remains below 25%.

• Investors are awaiting further economic data from the euro area, particularly on inflation, unemployment, and wages, to reassess these expectations.

European Economy

Following the trade agreement with India, markets have grown more optimistic about the outlook for the European economy, as the strategic partnership helps diversify supply chains and expand the services sector’s footprint in a vast consumer market. This supports more sustainable European growth and reduces vulnerability to global trade disputes.

The European Union and India reached a historic trade agreement this week after nearly 20 years of negotiations, a deal described by European Commission President Ursula von der Leyen as the “mother of all deals.”

The Japanese yen retreated in Asian trading on Friday against a basket of major and secondary currencies, moving into negative territory versus the US dollar and pulling away from a three-month high, amid renewed corrective moves and profit-taking, following weaker-than-expected inflation data from Tokyo.

The data showed easing inflationary pressures on policymakers at the Bank of Japan, which led to a decline in expectations for a Japanese interest rate hike in March. Despite the current pullback, the yen remains on track to record its first monthly gain since last August, supported by growing speculation over coordinated intervention by US and Japanese monetary authorities in the foreign exchange market.

Price Overview

• Japanese yen today: The dollar rose against the yen by 0.6% to 153.99, from an opening level of 153.08, while the session low was recorded at 152.86.

• The yen ended Thursday up 0.2% against the dollar, after losing 0.8% the previous day amid corrective moves and profit-taking from a three-month high at 152.09.

Tokyo Core Inflation

Data released today in Japan showed that Tokyo’s core consumer price index rose by 2.0% in January, the slowest pace since October 2024, below market expectations of a 2.2% increase, compared with a 2.3% rise in December.

The slowdown in prices clearly reduces inflationary pressure on Bank of Japan policymakers, narrowing the scope for further interest rate increases this year.

Japanese Interest Rates

• Following the data, market pricing for a quarter-point rate hike by the Bank of Japan at its March meeting fell from 20% to 10%.

• Investors are now awaiting further data on inflation, unemployment, and wages in Japan to reassess these expectations.

Monthly Performance

• Over January trading, which officially concludes at today’s settlement, the Japanese yen is up around 2.0% against the US dollar, on track for its first monthly gain since last August.

• On January 14, 2026, the yen hit an 18-month low of 159.45 per dollar, approaching the psychological 160 level, prompting Japanese authorities to issue clear warning statements in an effort to curb the currency’s decline and support stability in the FX market.

US–Japan Coordinated Intervention

Sources told Reuters that the New York Federal Reserve reviewed dollar-yen exchange rates with market participants on Friday, January 23, a move widely seen as a strong signal of potential intervention, amid ongoing and intensive coordination between US and Japanese authorities to address sharp market volatility.

Senior Japanese officials, including the finance minister and top diplomats, said on Monday that they are in “close coordination” with the United States on foreign exchange issues, based on a joint statement issued in September 2025.

Prime Minister Sanae Takaichi warned that the government would “take the necessary steps” against any abnormal or speculative moves in the market.

Meanwhile, Bank of Japan money market data indicated that the recent sharp rise in the yen against the dollar was unlikely to have been driven by direct official intervention.

China’s potential secret weapon in the global race to lead artificial intelligence innovation may lie in its vast electricity resources. While China has been quietly accelerating the development and integration of large language models, Western countries are facing growing trade-offs related to energy security in order to keep data centers running.

Rising power demand and the grid capacity required to support the expanding computational loads of AI are placing immense strain on electricity networks across the West. These grids were already fragile in the United States and Europe, as electrification accelerated and solar and wind capacity was added at a pace that outstripped investment in supporting infrastructure. As a result, large-scale power outages have become more frequent, alongside painful increases in energy prices.

Jeremy Forre, senior vice president of strategic sourcing at Straighten Energy, wrote in a recent opinion piece for Utility Dive: “As power demand rises and grid modernization accelerates, utilities and developers are facing a double pressure of global trade uncertainty and grid reliability.”

Paradoxically, however, China — the world’s largest installer of renewable energy and effectively the first true “electric nation” — does not suffer from the same problems, or at least not to the same existential degree.

One key difference is that China has invested heavily in expanding and upgrading its power grids, successfully aligning grid capacity with demand far more effectively than its Western counterparts. While China experienced a series of regional power outages earlier in the decade, it has not faced any major or dangerous nationwide outages since.

This places China in an exceptionally strong economic and geopolitical position. Relative abundance, stability, and lower electricity costs could give the country a significant edge in the global AI arms race. Alberto Vettoretti, managing partner at consultancy Dezan Shira & Associates, told the South China Morning Post recently: “In terms of power capacity, the gaps between China and the United States and the European Union are large, and China is clearly moving ahead in scale, structure, and growth momentum.”

Moreover, China has begun offering energy price subsidies for data centers after Chinese technology firms complained about power costs “driven by the use of domestically produced semiconductors, which are less efficient than Nvidia chips,” according to a recent Guardian report. These subsidies are part of a broader package of incentives aimed at supporting AI companies in China. Time magazine reported this week: “As AI dominance becomes a central government policy objective, every city and region is offering incentives to startups in the sector.”

Although China still lags behind the United States in the development and design of AI technologies, Chinese tech firms are positioned to catch up with, and potentially surpass, Silicon Valley in the not-too-distant future. The government’s “AI Plus” initiative, announced last August, sets out an ambition to “reshape production models and human life,” integrating AI into 90% of China’s economy by 2030.

For the world’s second-largest economy, this will require enormous amounts of electricity and vast grid capacity. Yet Beijing can also harness AI itself to improve grid efficiency. Artificial intelligence can play a central role in managing a power network that increasingly relies on volatile energy sources while simultaneously facing rising round-the-clock demand. Large language models can use supply-and-demand data to calculate fine-grained fluctuations in real time, at lower cost than many traditional computational models.

Fang Luorui of Xi’an Jiaotong-Liverpool University told Reuters earlier this month: “If AI models are well trained to accurately predict how much renewable electricity will be generated throughout the day and how much power will be needed at corresponding times, grid operators can decide how to balance supply and demand in advance, more efficiently and safely.”

China plans to comprehensively integrate artificial intelligence into its power grid by next year.