Gold prices declined in European trading on Wednesday, marking their first loss in four sessions. The pullback comes after the metal hit a five-week high earlier in Asian trading, as profit-taking and improved market risk appetite weighed on the precious metal following a major trade agreement between the US and Japan.

The US dollar also began rebounding from a two-week low, as recession concerns eased ahead of further trade updates expected before the August 1 deadline.

The Price

Gold prices dropped 0.45% to $3,416.52 an ounce, down from the session’s open at $3,431.44, after reaching an earlier high of $3,438.94 — the highest since June 16.

On Tuesday, gold settled with a 1.0% gain, its third consecutive daily increase, supported by lower US yields and a weaker dollar.

US Dollar

The US Dollar Index rose about 0.2% on Wednesday, attempting to recover from a two-week low of 97.31. It’s on track for its first gain in four sessions, reflecting a broad-based rebound in the greenback.

Beyond bargain buying, the dollar’s strength was boosted by a significant US-Japan trade deal that helped ease recession fears in the world’s largest economy.

Trade Developments

President Donald Trump announced on Tuesday a “massive” trade agreement with Japan, which includes reciprocal 15% tariffs on Japanese exports to the US and a reduction in auto tariffs from 25% to 15%.

Treasury Secretary Scott Besant also stated that US and Chinese officials would meet next week in Stockholm to discuss a possible extension of the trade negotiation deadline to August 12.

US Interest Rates

Trump continued his attacks on Fed Chair Jerome Powell, calling him a “fool” for keeping interest rates “too high” and claimed Powell would step down in eight months.

According to the CME FedWatch Tool, there’s currently a 5% chance of a 25-basis-point rate cut at the July meeting, and a 95% probability of rates remaining unchanged.

For September, markets are pricing in a 59% chance of a rate cut and a 41% chance of no change.

The upcoming Fed policy meeting next week is expected to offer more clarity on the rate path for the remainder of the year.

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said more trade agreements before August 1 could boost overall risk appetite and reduce demand for gold.

He added that if the US dollar remains under pressure, gold has a realistic chance of retesting the $3,500 level in the near term.

Matt Simpson of City Index noted that current conditions suggest low liquidity, and a decline in political pressure on Powell could reduce volatility, potentially giving bears an opportunity to target moves below $3,500.

SPDR Gold Trust

Holdings in the SPDR Gold Trust — the world’s largest gold-backed ETF — rose by 7.74 metric tons yesterday, marking the biggest daily increase since April 10. Total holdings now stand at 954.80 metric tons, the highest since June 27.

The euro declined in European markets on Wednesday against a basket of global currencies, retreating from a two-week high versus the US dollar. The currency is on track for its first loss in four sessions, driven by profit-taking and a rebound in the US dollar following a major trade deal between the US and Japan.

Later today, markets await the start of the European Central Bank’s (ECB) highly anticipated monetary policy meeting, with expectations pointing to an unchanged interest rate. Traders are looking for clues on whether the ECB may resume its easing cycle later this year.

The Price

EUR/USD slipped by 0.2% to $1.1731, down from an opening price of $1.1754, after hitting a session high of $1.1756.

On Tuesday, the euro climbed 0.55% against the dollar, marking its third consecutive daily gain and reaching a two-week peak at $1.1761 on rising odds of a US rate cut in September.

US Dollar

The US Dollar Index rose by 0.15% on Wednesday, attempting to rebound from a two-week low of 97.31 points. It is on course to log its first gain in four sessions, reflecting a modest recovery in the greenback against major currencies.

Beyond technical buying at lower levels, the dollar's rebound was supported by a significant trade deal between the US and Japan, which eased concerns over a potential recession in the world's largest economy.

On Tuesday, President Donald Trump announced a "massive" trade agreement with Japan, including reciprocal tariffs of 15% on Japanese exports to the US and a reduction in tariffs on Japanese vehicles from 25% to 15%.

European Central Bank

The ECB meets today and tomorrow to evaluate its monetary policy stance amid recent economic developments across the eurozone.

The bank is widely expected to keep its key interest rate unchanged at 2.15%, the lowest level since October 2022.

Markets are closely watching for signs of further easing and potential rate cuts later this year.

Eurozone Rates Outlook

According to Reuters sources, a clear majority at the last ECB meeting favored leaving rates unchanged in July, with some members calling for a longer pause.

Money markets currently price in a 30% chance of a 25 basis-point ECB rate cut in July.

The Japanese yen declined in Asian markets on Wednesday against a basket of major and minor currencies, pulling back from a two-week high against the US dollar recorded earlier in the session. This marked its first loss in three days amid active profit-taking and corrective movements.

The decline followed the announcement of a major trade agreement between Tokyo and Washington, which includes US tariff reductions on Japanese imports and a commitment by Japan to invest approximately $550 billion in the United States.

The Price

USD/JPY rose 0.4% to ¥147.20, up from an opening rate of ¥146.59, after hitting a session low of ¥146.19 — the weakest level since July 11.

On Tuesday, the yen gained 0.55% against the dollar, posting its second consecutive daily gain amid falling yields on 10-year US Treasury bonds.

Major Trade Agreement

President Donald Trump announced Tuesday the signing of a “massive” trade agreement with Japan, including reciprocal tariffs of 15% on Japanese exports to the US and a reduction of tariffs on Japanese cars to 15%, down from the current 25%.

In a post on Truth Social, Trump described the deal as “perhaps the biggest ever,” noting that Japan will inject $550 billion in investments into the United States, with America set to earn 90% of the profits.

Trump added that the agreement will open Japanese markets to American goods, including cars, trucks, rice, and other agricultural products, claiming it will create “hundreds of thousands of jobs.”

Japanese Prime Minister Shigeru Ishiba stated that US tariffs on Japanese vehicles would be reduced from 25% to 15% — a significant step, given that the auto sector forms the backbone of Japanese exports to the US, accounting for 28.3% of total shipments in 2024, according to customs data.

Japan’s auto exports (including cars, buses, and trucks) to the US dropped by 26.7% in June, following a 24.7% decline in May.

Total Japanese exports to the US — its second-largest trading partner — amounted to ¥10.3 trillion ($70.34 billion) between January and June, a 0.8% year-over-year decrease.

Ishiba’s Political Future

Tuesday’s announcement comes just days after Prime Minister Ishiba’s ruling coalition lost its majority in the Japanese Upper House elections, raising concerns about weakened leverage in U.S. negotiations.

According to HSBC, a favorable trade deal with the U.S. could help Ishiba fend off a no-confidence vote or internal challenges from within the Liberal Democratic Party.

While Ishiba declared his intention to remain prime minister after the electoral loss, Japanese media outlet Yomiuri reported early Wednesday that he would decide whether to stay in office based on the progress of tariff negotiations.

Japanese Interest Rates

Last week’s data showed core inflation in Japan slowed more than expected in June, suggesting weakening price pressures on the Bank of Japan.

Following the release, market expectations for a 25 basis-point rate hike at the BoJ’s July meeting dropped from 45% to 35%.

Investors now await more data on inflation, unemployment, and wages to reassess these odds.

Major energy producers such as Shell have withdrawn from a prominent initiative aimed at establishing a global standard for “net-zero” emissions, after a draft proposal effectively called for banning the development of new oil and gas projects, according to documents reviewed by the Financial Times.

The departing companies include Shell, BP, Norway’s Aker BP, and Canada’s Enbridge, all of which exited an expert advisory group set up by the Science Based Targets initiative (SBTi). SBTi is a widely referenced climate standards body, whose certification is sought by global corporations like Apple and AstraZeneca.

This wave of withdrawals highlights rising tensions between the fossil fuel industry and evolving climate accountability frameworks.

Dispute Over New Oil and Gas Projects

The controversial draft outlined a ban on any new oil and gas project development by companies submitting climate plans to SBTi—either immediately or by 2027, whichever comes first. It also called for a sharp decline in fossil fuel production, sparking concerns across the energy sector that the proposed standards may impose an unworkable path to net-zero goals.

Shell, which had participated intermittently in SBTi processes since 2019, stated that it withdrew after determining the draft “does not reflect the industry's perspective in any meaningful way.”

Nevertheless, Shell reiterated its commitment to reaching net-zero emissions by 2050, but emphasized that any credible standard must offer “sufficient flexibility” and reflect a “realistic pathway” for society.

Aker BP cited limited ability to influence the developing standard as the reason for its withdrawal, insisting it had “no bearing whatsoever” on its climate ambitions. Enbridge declined to comment, according to the FT.

SBTi Halts Work on Oil and Gas Standard

Following these high-profile exits, SBTi announced it had “temporarily paused” work on its oil and gas standard, citing “internal capacity considerations.”

However, the group denied that the decision was influenced by industry pressure, telling the Financial Times there was “no basis” for such claims.

Meanwhile, reports emerged that SBTi has also delayed and softened planned guidelines for financial institutions on fossil fuel financing.

According to informed sources, the deadline to restrict funding or insurance for companies developing new oil and gas projects was pushed from 2025 to 2030, after David Kennedy, a former EY partner, became SBTi’s executive director in March.

Growing Divide Between Industry and Climate Standards

These developments underscore a deepening divide between climate goals and industry realities. While fossil fuel combustion remains the leading cause of global warming—and scientists stress the need to cap temperature rises at 1.5°C to avoid irreversible catastrophe—the oil and gas industry remains wary of climate standards that effectively demand a halt to exploration and production, citing concerns over energy security, investor interests, and the global ability to meet demand during the energy transition.

A source involved in drafting the oil and gas and financial sector standards said: “The longer we delay, the more cover we give to Big Oil.”

Despite these disputes, Shell and other companies continue to publicly commit to achieving net-zero emissions by 2050. Yet the frameworks and standards that are supposed to clearly define what “net-zero” actually means remain mired in controversy.