Gold prices declined in the European market on Monday at the beginning of the week’s trading, pressured by correction and profit-taking activity from record levels, in addition to the continued rebound of the US dollar in the foreign exchange market.

On Tuesday, the Federal Reserve’s key monetary policy meeting will begin, with decisions due on Wednesday. Expectations in global financial markets are currently stable around a 25 basis point interest rate cut by the Fed.

Gold prices today: prices fell by 0.45% to $3,626.69 an ounce, from the opening level of $3,642.72, and recorded a high of $3,646.94.

At Friday’s settlement, gold prices rose by 0.25%, the second gain in the past three days, near the all-time high of $3,674.80 an ounce.

Over the past week, gold gained 1.55%, marking a fourth consecutive weekly rise, supported by expectations of Fed rate cuts and mounting global financial stability concerns.

The US dollar index rose on Monday by about 0.1%, maintaining gains for the second consecutive session, reflecting the continued rebound of the US currency against a basket of major and minor counterparts. In addition to buying activity from lower levels, the dollar’s rebound comes amid reluctance to build new short positions ahead of the Fed meeting this week.

The Federal Reserve’s monetary policy meeting begins on Tuesday, with decisions due on Wednesday. Expectations point to a 25 basis point interest rate cut. Monetary policy data, economic projections, and statements from Fed Chair Jerome Powell are expected to provide clear guidance on whether further cuts may follow during the remainder of this year.

According to CME FedWatch: the probability of a 25 basis point rate cut at this week’s meeting is stable at 100%, while the probability of a 50 basis point cut is stable at 4%.

The probability of a 25 basis point cut in October is also stable at 100%, while the probability of a 50 basis point cut stands at 5%.

Tim Waterer, chief market analyst at KCM Trade, said: “Gold appeared technically overbought, which prompted some profit-taking at the start of the new week. The resilience of the dollar is another factor weighing on gold.”

Waterer added: “A period of consolidation is a likely scenario for gold, while any retreat towards support at $3,500 is expected to attract buyers, as long as the Fed maintains its cautious approach.”

Goldman Sachs said in a note on Friday: “While we see upside risks to our $4,000 forecast by mid-2026, elevated speculative positioning increases the likelihood of tactical pullbacks, as investor positions tend to normalize over time.”

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.15 metric tons on Friday, marking a second consecutive daily decline, bringing the total to 974.80 metric tons, the lowest since August 28.

The euro fell in European trading on Monday against a basket of global currencies, heading toward its first loss in three sessions versus the US dollar, pressured by concerns over France’s financial stability following a credit downgrade for the eurozone’s second-largest economy.

After last week’s hawkish European Central Bank meeting, the chances of further rate cuts in Europe by year-end diminished. To confirm these expectations, investors are now waiting for additional evidence on the future path of monetary easing in the euro area.

Price Overview

• Euro exchange rate today: the euro declined against the dollar by more than 0.1% to $1.1722, from an opening of $1.1735, after hitting a high of $1.1736.

• The euro ended Friday slightly higher, gaining less than 0.1% against the dollar in its second consecutive daily advance.

• Last week, the euro gained 0.2% versus the dollar, also its second straight weekly rise, supported by reduced odds of further European rate cuts compared to rising expectations of US Federal Reserve easing.

Financial Stability in France

Fitch’s decision on Friday to downgrade France’s sovereign credit rating to its lowest ever triggered widespread concern in global financial markets. The loss of AA- status for the eurozone’s second-largest economy is viewed as a troubling sign of Europe’s fiscal fragility.

The downgrade reflects a combination of domestic political tensions and worsening public debt, adding pressure to European bond markets and raising fears among investors of contagion to other economies within the bloc.

European Interest Rates

• In line with expectations, the ECB last week left its main interest rate unchanged at 2.15%, the lowest level since October 2022, marking the second consecutive meeting with no change.

• In its monetary policy statement, the ECB said inflation is currently nearing its 2% medium-term target and that the Governing Council’s overall assessment of inflation expectations remained broadly unchanged.

• Sources indicated that policymakers believe no further rate cuts are needed to reach the 2% inflation goal, despite new economic forecasts pointing to lower rates over the next two years.

• Sources also noted that unless the eurozone faces another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Market pricing for an October rate cut of 25 basis points has dropped from 30% to under 10%.

• Traders have pared back bets on ECB easing, signaling an end to this year’s rate-cutting cycle.

• To reassess these expectations, investors will closely monitor upcoming European economic data and remarks from ECB officials in the coming period.

The Japanese yen rose in Asian trading on Monday at the start of the week against a basket of major and minor currencies, moving into positive territory versus the US dollar amid strong safe-haven demand fueled by concerns over global financial stability.

The Bank of Japan meets later this week to discuss the appropriate monetary policy for the world’s fourth-largest economy, with expectations it will keep interest rates unchanged for the fifth consecutive meeting.

Price Overview

• USD/JPY today: the dollar fell about 0.2% against the yen to ¥147.39 from the opening level of ¥147.65, after hitting a high of ¥147.77.

• The yen ended Friday down about 0.3% versus the dollar, its second loss in three days, pressured by weak prospects for a Japanese rate hike.

• Over the past week, the yen lost 0.2% against the dollar, its third straight weekly decline, amid mounting political uncertainty in Japan following Prime Minister Ishiba’s resignation.

Financial Concerns

Fitch’s downgrade of France’s sovereign credit rating on Friday to its lowest ever sparked broad concern in global financial markets. The loss of AA- status for the eurozone’s second-largest economy is seen as a troubling sign of Europe’s fragile fiscal situation.

The downgrade reflects a mix of domestic political tensions and surging public debt, increasing pressure on European bond markets and raising investor fears of contagion to other economies in the bloc.

Traders have recently dumped long-term government bonds in Europe, the UK, and the US amid renewed concerns over rising debt levels in major economies. This shift has raised market worries that governments worldwide may lose control over fiscal deficits, threatening higher borrowing costs and increased pressure on global financial stability.

Bank of Japan

• The Bank of Japan meets on Thursday to review policy, with decisions due Friday.

• Market pricing for a 25-basis-point rate hike at this meeting currently stands near 20%.

• With expectations firmly leaning toward no change in rates for a fifth straight meeting, focus will be on Governor Kazuo Ueda’s comments regarding the policy outlook.

Yen Outlook

Analysts at MUFG wrote that the yen’s performance remains weak in the near term, weighed down by Japan’s political uncertainty after Ishiba’s resignation.

They added that the BOJ will need to signal the possibility of a rate hike soon—perhaps as early as next month—to help reverse yen weakness.

Copper prices fell on Friday as the dollar strengthened against most major currencies, alongside concerns over Chinese demand and rising warehouse inventories.

The Yangshan copper premium rose 1.8% to $58 per ton, the highest level in three months.

The Chinese yuan hit a one-week high against the US dollar, making dollar-denominated metals more attractive to Chinese buyers.

Meanwhile, China’s imports of unwrought copper reached 425,000 tons in August, down from July but higher than a year earlier. Imports of copper concentrates climbed to 2.76 million tons, the highest level in four months.

Analysts at ANZ Bank said in a note: “Falling treatment charges have failed to curb China’s appetite for copper concentrates. Favorable import parity factors and expectations of weaker domestic production are likely to keep refined copper imports strong in September.”

On the trade side, overall Chinese export growth slowed in August to its weakest pace in six months, while imports rose 1.3%, compared with 4.1% growth in the previous month.

Registered copper inventories at the London Metal Exchange stood at 155,825 tons, with outflows of 2,125 tons across several locations, along with a fresh 8,500-ton cancellation in South Korea, according to daily exchange data.

Separately, the US dollar index rose 0.2% to 97.7 points at 16:24 GMT, after hitting a high of 97.8 and a low of 97.4.

In US trading, copper futures for December delivery fell 0.2% to $4.65 per pound as of 16:31 GMT.