Gold prices declined in European markets on Thursday, extending losses for the second consecutive day and moving away from a five-week high. The drop came as part of ongoing correction and profit-taking activity, alongside weakening safe-haven demand amid easing global trade tensions.

Meanwhile, the US dollar began to rebound in the foreign exchange market ahead of key economic data releases from the United States, which are expected to provide further evidence on the likelihood of an interest rate cut in September.

The Price

Gold fell by 0.65% to $3,365.98 per ounce, down from the opening level of $3,387.51. The session high reached $3,393.48.

On Wednesday, gold closed down by 1.3% — its first loss in the past four sessions — due to correction and profit-taking after earlier hitting a five-week high of $3,438.94 per ounce.

Trade Developments

Following the major trade agreement between the United States and Japan, some European Commission officials confirmed that the EU and the US are close to reaching a similar deal. This would impose a 15% tariff on European imports, while exempting certain goods from US duties.

US Treasury Secretary Scott Besant stated that American and Chinese officials will meet in Stockholm next week to discuss extending the trade negotiation deadline to August 12.

US Dollar

The US Dollar Index rose by approximately 0.15% on Thursday, beginning a recovery from its two-week low of 97.10, reflecting continued rebound in the dollar against a basket of global currencies.

This rebound comes amid reports that President Donald Trump will visit the Federal Reserve later today. It remains unclear whether Trump — who has repeatedly criticized Jerome Powell for not cutting US interest rates more aggressively — will meet with the Fed Chair.

US Interest Rates

According to the CME FedWatch Tool: The probability of a 25-basis-point rate cut in the July meeting remains steady at 3%, while the probability of holding rates unchanged is at 97%.

The probability of a 25-basis-point rate cut in the September meeting is currently priced at 64%, versus a 36% chance of no change.

Investors are awaiting key US data due later today, including weekly jobless claims and performance metrics for key sectors of the US economy during July, in order to reassess rate expectations.

Gold Outlook

Bryan Lan, Managing Director at Singapore-based GoldSilver Central, stated: “We saw yesterday that gold prices appeared poised for another upward wave until trade-related news triggered some profit-taking.”

He added, “We also saw a notable decline in the dollar, which of course supports gold. So I think this is just a minor pullback for now — in fact, we remain very bullish on gold.”

SPDR Fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, remained unchanged yesterday, keeping the total at 954.80 metric tons — the highest level since June 27.

The euro rose in European markets on Thursday against a basket of global currencies, extending its gains for a fifth consecutive day against the US dollar and reaching its highest level in two weeks. This advance was supported by continued weakness in the US currency, ahead of the European Central Bank’s upcoming policy decisions.

The ECB is widely expected to leave interest rates unchanged following its seventh consecutive cut at the previous meeting. Markets are now watching closely for additional signals regarding the possibility of resuming the monetary easing cycle during the remainder of the year.

The Price

The euro rose 0.1% against the dollar to $1.1780 — its highest level since July 7 — up from today’s opening price of $1.1767, with an intraday low of $1.1762.

The euro had already closed Wednesday up 0.1% against the dollar, marking a fourth consecutive daily gain, amid optimism over a potential trade agreement between the European Union and the United States.

US Dollar

The US Dollar Index declined by 0.1% on Thursday, deepening its losses for the fifth consecutive session and hitting a two-week low of 97.10, reflecting ongoing weakness of the greenback against a basket of major and minor currencies.

This latest drop follows news that President Donald Trump is expected to visit the Federal Reserve later today. It remains unclear whether Trump — who has repeatedly criticized Jerome Powell for not cutting US interest rates more aggressively — will meet with the Fed Chair.

European Central Bank

The ECB will conclude its fifth policy meeting of 2025 later today, with expectations pointing to a pause in rate cuts. The upcoming statement is anticipated to provide further guidance on the future trajectory of interest rates through the rest of the year.

Current expectations suggest the ECB will keep rates unchanged at 2.15% — the lowest level since October 2022 — following the seventh consecutive cut in the previous meeting.

The interest rate decision and policy statement are due at 13:15 GMT, with ECB President Christine Lagarde set to speak at the press conference at 13:45 GMT.

Euro Outlook

Here at Economies.com, we expect that if the ECB’s commentary proves more hawkish than expected, the likelihood of another rate cut before year-end could diminish, leading to further gains for the euro against a basket of global currencies.

The Japanese yen rose in Asian markets on Thursday against a basket of major and minor currencies, extending its gains for a fourth consecutive day against the US dollar and reaching its highest level in two weeks, as safe-haven buying of the currency gained momentum amid political uncertainty in Japan.

Local media reports indicated that Prime Minister Shigeru Ishiba was preparing to announce his resignation to take responsibility for the ruling party’s sweeping defeat in the House of Councillors elections.

The Price

The yen strengthened as the dollar fell 0.45% to ¥145.85 — its lowest level since July 10 — down from today’s opening at ¥146.50, with an intraday high of ¥146.52.

The yen had already risen by about 0.1% against the dollar on Wednesday, marking a third consecutive daily gain, following the announcement of a major trade agreement between Japan and the United States.

Political Developments

Prime Minister Shigeru Ishiba denied plans to resign after local media had reported his intention to step down over the ruling party’s severe election loss.

“I strongly shared a sense of crisis with former prime ministers, but I have not discussed resigning at all,” Ishiba stated.

Opinions and Analysis

Carol Kong, currency strategist at the Commonwealth Bank of Australia, said the yen will continue to face headwinds due to persistent political uncertainty.

“We still don’t know what Prime Minister Ishiba intends to do… so I think there remains some ambiguity surrounding Japan’s fiscal outlook and the Bank of Japan’s policy,” Kong added.

Interest Rate Outlook

Market pricing for a potential 25-basis-point rate hike by the Bank of Japan at next week’s meeting remains steady below 35%.

Investors are awaiting further data on inflation, unemployment, and wage levels in Japan before reassessing those odds.

The large trade deal between Japan and the United States has given the Bank of Japan added flexibility to raise interest rates before the end of the year.

Most major US stock indexes rose at the opening of Wednesday's session, with the S&P 500 hitting a new all-time high following the announcement of a trade deal between the United States and Japan.

US President Donald Trump announced a trade agreement with Japan that includes reciprocal tariffs of 15% on exports between the two countries. He also confirmed that Washington is seeking a trade deal with the European Union, with the current mutual tariff suspension set to expire in early August.

Later today, specifically after the close of the session, both Tesla and Alphabet are scheduled to report their second-quarter earnings for 2025.

As of 15:15 GMT, the Dow Jones Industrial Average rose by 0.4% (173 points) to 44,675 points. The broader S&P 500 index climbed 0.2% (13 points) to 6,323 points, while the tech-heavy Nasdaq Composite edged up by less than 0.1% (3 points) to 20,896 points.