Gold prices rose in European trading on Wednesday, extending gains for a seventh consecutive session and continuing to break records after surpassing the $3,500-per-ounce mark for the first time in history. The metal drew strong safe-haven demand amid mounting concerns over rising global debt levels.

With strong expectations that the Federal Reserve will cut interest rates by 25 basis points at its September meeting, global financial markets are now turning their focus to a series of key U.S. labor market data beginning today.

Price Overview

• Gold prices today: Spot gold rose by 0.4% to $3,546.90, an all-time high, from the session’s opening at $3,533.27, after touching a low of $3,526.47.

• On Tuesday, gold settled 1.65% higher, marking a sixth straight daily gain—the longest winning streak this year—supported by strong investment flows.

Global Debt

Traders sold off long-term government bonds this week across Europe, the UK, and the U.S., as fears resurfaced about surging debt levels in major economies. Markets grew increasingly concerned that governments could lose control over widening fiscal deficits, raising borrowing costs and adding pressure to global financial stability.

Trade Tensions

Uncertainty also increased after the Trump administration announced it would seek an urgent Supreme Court ruling on tariffs that a U.S. appeals court deemed illegal last week.

U.S. Interest Rates

• San Francisco Fed President Mary Daly reiterated support on Friday for lowering rates, citing risks to the labor market.

• According to CME FedWatch: Markets currently price a 92% chance of a 25-basis-point rate cut at the September meeting, with only an 8% probability of no change.

• Odds of a 25-basis-point cut in October are even higher, at 95%, versus 5% for no move.

• To recalibrate September expectations, investors await a slate of key U.S. labor data this week: July job openings due later today, ADP private payrolls and weekly jobless claims on Thursday, and Friday’s August nonfarm payrolls report.

Outlook for Gold

• Ilya Spivak, macro strategist, noted: “The Supreme Court case has injected significant uncertainty into markets. If the outcome goes against the president, it could fundamentally reshape the macroeconomic landscape.”

• He added: “Any attempt to undermine the independence of the Federal Reserve is also highly significant. The direction for gold remains clearly higher, with momentum largely one-sided.”

SPDR Holdings

Holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 12.88 metric tons on Tuesday—the largest daily increase since March 21—bringing the total to 990.56 metric tons, the highest level since August 16, 2022.

The British pound fell in European trading on Wednesday against a basket of global currencies, extending losses for a second consecutive session against the U.S. dollar. The currency is now nearing a four-week low as heavy selling continued amid concerns over the UK’s financial stability.

The selloff in UK government bonds coincided with weakness across major sovereign debt markets, as investor focus remains fixed on rising debt levels.

Price Overview

• GBP/USD declined by more than 0.2% to $1.3359, down from the session’s opening at $1.3389, after recording a high of $1.3396.

• On Tuesday, the pound lost 1.1% against the dollar, marking its steepest daily drop since April 4, as heavy selling intensified on worries about the government’s ability to control the nation’s finances.

UK Bonds

The UK gilt market came under severe pressure, with 30-year borrowing costs rising to their highest level since 1998, leaving the pound under heavy downside pressure. The bond selloff mirrored moves in global markets, where concerns about elevated debt burdens dominated sentiment.

Starmer’s Changes

Prime Minister Keir Starmer appointed former Bank of England Deputy Governor Minouche Shafik as his chief economic adviser, in a move aimed at strengthening his economic credentials ahead of what is expected to be a highly challenging budget later this year.

The decision sparked political debate in the UK, with critics suggesting it undermines the standing of Chancellor Rachel Reeves within the government. Analysts noted that the reshuffle on Parliament’s first day back from summer recess sharpened focus on the economic challenges of high borrowing, slowing growth, and the highest inflation rate among G7 economies.

Market Commentary

• Ray Attrill, head of FX strategy at National Australia Bank, said: “The deterioration of public finances is essentially a European problem. France faces the same issues. They’ve been in the background for some time.”

• He added: “It likely resonates more in the UK because of the Liz Truss episode… Part of the concern is the upcoming autumn statement or budget.”

• Attrill continued: “At this stage, there’s a lack of market confidence that the government is ready to tackle the scale of the fiscal deficit and the rapid debt build-up effectively.”

• Mark Dowding, chief investment officer for fixed income at RBC BlueBay Asset Management, noted: “Everyone wants reassurance on the soundness of public finances, but with yields rising, the fiscal gap is only widening.”

• Nick Kennedy, FX strategist at Lloyds, added: “The UK has faced a precarious fiscal situation, and that will continue. Over the summer there was some risk in the interest rate market. Now investors want to extend that risk to the pound as well.”

The Japanese yen declined in Asian trading on Wednesday against a basket of major and minor currencies, extending losses for a fourth straight session against the U.S. dollar. The currency is now nearing a five-week low touched during Tuesday’s session, as political uncertainty in Japan—the world’s fourth-largest economy—continued to weigh.

Less hawkish comments from a Bank of Japan board member further reduced the likelihood of a rate hike before year-end, with investors awaiting stronger evidence on the path of policy normalization.

Price Overview

• USD/JPY rose about 0.4% to ¥148.92, up from the session’s opening at ¥148.36, after touching a low of ¥148.26.

• On Tuesday, the yen closed down 0.8% against the dollar, its third consecutive daily loss and the steepest decline since July 31, hitting a five-week low of ¥148.94 amid heavy selling pressure.

Political Uncertainty

Hiroshi Moriyama, secretary general of Japan’s ruling party and a close ally of Prime Minister Shigeru Ishiba, announced his resignation, deepening the political crisis and casting doubt over Ishiba’s future.

The development followed increased pressure on Ishiba after recent electoral losses, as calls for his resignation have intensified. So far, Ishiba has resisted stepping down. Analysts say Moriyama’s departure could weaken Ishiba’s internal support and increase the likelihood of further political pressure in the near term.

The situation has opened the door for Sanae Takaichi as a leading contender to succeed Ishiba. Known for her economic stance favoring persistently low interest rates, her potential leadership is seen as reinforcing expectations for a more accommodative monetary path.

Market Commentary

• Kit Juckes, chief FX strategist at Société Générale, said: “On the surface, political uncertainty, and the potential resignation of Prime Minister Shigeru Ishiba in the coming days or weeks, is weighing negatively on the yen.”

• Lee Hardman, senior currency analyst at MUFG, added: “The deepening political uncertainty is likely to remain a drag, while the lack of a strong hawkish signal from Deputy Governor Ryozo Himino on Tuesday will encourage speculators to rebuild short yen positions.”

Japanese Interest Rates

• Deputy Governor Ryozo Himino noted that the BoJ “should continue raising rates,” but emphasized that global economic uncertainty remains high, reducing the urgency to tighten borrowing costs.

• Board member Nakagawa warned of risks from trade policy and said he is awaiting the upcoming Tankan survey for clearer guidance on the normalization path.

• Markets currently price less than a 30% chance of a quarter-point hike at the September meeting.

Investors are closely monitoring upcoming data on inflation, unemployment, and wage growth in Japan, alongside further comments from BoJ officials, to reassess rate expectations.

Cryptocurrencies declined on Tuesday as risk appetite weakened amid rising bets on a Federal Reserve rate cut, alongside higher yields on U.S. Treasuries as well as European and U.K. government bonds.

The yield on the U.S. 10-year Treasury rose by 5.5 basis points to 4.281%, while the 30-year yield climbed 4.6 basis points to 4.964%.

This came after a U.S. federal appeals court ruled on Friday that most tariffs imposed by President Donald Trump were unlawful, adding further uncertainty to U.S. policy decisions.

On the data front, the U.S. ISM manufacturing PMI rose to 48.7 in August from 48.0 in July, though it remained below the 50 threshold separating expansion from contraction.

Investor focus now shifts to Friday’s U.S. nonfarm payrolls report for fresh signals on the labor market.

According to CME FedWatch, markets are pricing a 92% probability of a 25-basis-point rate cut by the Federal Reserve this month.

Ethereum

As of 20:54 GMT, Ethereum fell 2.1% on CoinMarketCap to $4,272.2.