The current rally is supported by the continued decline of the US dollar against a basket of global currencies, pressured by concerns over a potential US government shutdown and expectations that the Federal Reserve will cut interest rates twice before the end of this year.

To reassess those expectations, markets are awaiting a series of highly important US labor market reports this week, which the Fed relies heavily on in shaping its monetary policy.

Price Overview

• Gold prices today: Spot gold rose 1.0% to $3,871.78 per ounce, the highest level ever, from an opening price of $3,833.30, with a session low of $3,825.36.

• At Monday’s settlement, gold gained 1.95% in its third straight daily increase, driven by fears of a US government shutdown.

Monthly Performance

During September trading, which officially ends at today’s settlement, gold prices are up about 12.3%, on track for a second consecutive monthly gain and the biggest monthly rise since August 2011.

US Dollar

The dollar index fell 0.25% on Tuesday, extending losses for a third session in a row to its lowest level in a week, reflecting continued weakness in the US currency against its global peers.

Dollar weakness stems from concerns over a looming government shutdown, along with strong expectations that the Fed will deliver interest rate cuts in October and December.

US Interest Rates

• In its September meeting, the Fed delivered its first rate cut since December 2024, lowering rates by 25 basis points, and signaled openness to further easing.

• The Fed’s median projections point to an additional 50 basis points of cuts in 2025.

• Officials also anticipate one 25 basis point cut in 2026, with a similar move in 2027.

• According to the CME FedWatch Tool, markets currently price a 90% probability of a 25 basis point cut in October, with a 10% chance of rates staying unchanged.

• To recalibrate those October expectations, markets await several key US labor reports this week: job openings (Tuesday), private payrolls (Wednesday), weekly jobless claims (Thursday), and the September nonfarm payrolls report (Friday).

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said: “The looming US government shutdown is adding uncertainty to markets, accelerating gold’s gains.”

He added: “The $4,000 level now looks like a realistic year-end target for gold, with market dynamics such as lower interest rates and ongoing geopolitical tensions continuing to support the precious metal.”

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, rose by 6.01 metric tons on Monday, marking a second consecutive daily increase, lifting the total to 1,011.73 metric tons – the highest since July 15, 2022.

The euro rose in European trading on Tuesday against a basket of major currencies, extending gains for the third consecutive session against the US dollar, as the recovery from recent lows continued, supported by ongoing weakness in the greenback in the foreign exchange market.

The single currency is on track to achieve a second consecutive monthly gain, bolstered by the European Central Bank’s hawkish stance, after its recent meeting signaled no need for further monetary easing, which in turn reduced the likelihood of additional rate cuts in Europe before the end of the year.

Price Overview

• Today’s EUR/USD exchange rate: The euro gained about 0.2% to $1.1748, up from the session’s opening at $1.1726, with a low at $1.1712.

• On Monday, the euro closed 0.25% higher against the dollar, marking a second straight daily advance, rebounding from a three-week low of $1.1646.

US Dollar

The US dollar index fell by about 0.2% on Tuesday, extending losses for a third consecutive session and hitting a one-week low, reflecting persistent weakness in the greenback against a basket of currencies.

Dollar levels remain under pressure due to mounting concerns over a potential US government shutdown, as well as strong expectations that the Federal Reserve will cut interest rates in October and December.

Markets this week await a series of key US labor market reports, alongside remarks from Federal Reserve officials, to reassess these policy expectations.

Monthly Performance

In September trading, which officially concludes with today’s settlement, the euro is up more than 0.5% against the dollar, putting the currency on track for a second straight monthly gain.

European Interest Rates

• As expected, the European Central Bank kept its main interest rates unchanged this month at 2.15%, the lowest since October 2022, marking a second consecutive hold.

• In its policy statement, the ECB said inflation is currently approaching the 2% medium-term target and that the board’s assessment of inflation expectations remains broadly unchanged.

• Sources indicated policymakers believe no further cuts are needed to reach the 2% inflation target, despite updated forecasts pointing to lower rates in the coming two years.

• Unless the euro area faces another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Money market pricing for a 25-basis-point rate cut in October dropped from 30% to below 10%.

• Traders have trimmed bets on further monetary easing, signaling an end to the ECB’s rate-cutting cycle this year.

Going forward, investors will closely monitor upcoming European economic data as well as ECB officials’ commentary to reassess the outlook.

The Australian dollar rose broadly in European trading on Tuesday against a basket of major currencies, extending its gains for the third consecutive day against its US counterpart and hitting a one-week high, following the hawkish tone from the Reserve Bank of Australia (RBA).

As expected, the RBA decided to keep its cash rate unchanged at 3.60%, the lowest level in almost two and a half years, while voicing caution over elevated inflation during the third quarter of this year.

Price Overview

• Today’s AUD/USD exchange rate: The Australian dollar climbed 0.5% to 0.6609, the highest in a week, from an opening price of 0.6577, with a session low at 0.6571.

• On Monday, the Australian dollar closed up 0.45% against the greenback, marking a second consecutive daily gain, continuing its recovery from a three-week low of 0.6521.

Reserve Bank of Australia

In line with market expectations, the RBA on Tuesday kept its cash rate unchanged at 3.60%, the lowest since April 2023.

The central bank said recent data indicate inflation may prove higher than anticipated in Q3, while the overall economic outlook remains uncertain. It noted that the board deemed it appropriate to maintain caution on monetary policy but remains well-positioned to respond to international developments.

Earlier this year, the RBA cut rates in February, May, and August. With consumer prices running higher than expected, markets now await the full Q3 inflation report due in late October.

Australian Interest Rates

• Market pricing for a 25-basis-point rate cut in November fell from 85% to 55%.

• Investors await further data on inflation, unemployment, and wages in Australia to reassess the odds of another cut.

Opinions and Analysis

• Carol Kong, currency strategist at Commonwealth Bank of Australia, said the RBA’s statement carried a relatively hawkish tone, highlighting tensions in the flow of economic data and last week’s upside surprise in inflation.

• She added: “We still maintain our forecast for a 25-basis-point rate cut in November, but note that it is not guaranteed and depends on the Q3 CPI reading due in late 2025.”

Australian Dollar Performance

The Australian dollar has gained more than 6% year-to-date, benefiting from US dollar weakness and stronger risk appetite. In September alone, the AUD rose a more modest 0.6%, after touching its highest level in 11 months two weeks ago.

At the conclusion of its September 30 meeting, the Reserve Bank of Australia’s monetary policy committee decided on Tuesday morning to keep interest rates unchanged at 3.60%, the lowest level since April 2023, in line with market expectations.

In its August meeting, the RBA had cut interest rates by 25 basis points to 3.60%, resuming the monetary easing cycle that had paused in July.

Today’s decision aims to allow more time to assess economic developments in the country. The statement noted that recent data suggests inflation may be higher than expected in the third quarter, while the broader economic outlook remains uncertain.

•This statement is considered “positive” for the Australian dollar.