Gold prices fell in European trading on Tuesday, deepening losses for the third consecutive session and hitting a three-week low, as open selling positions accelerated and investors moved away from safe-haven assets amid easing trade tensions between the United States and China.

Later today, the Federal Reserve begins its highly anticipated monetary policy meeting, with decisions due Wednesday. Markets broadly expect a 25-basis-point rate cut — the second consecutive reduction in US interest rates.

Price Overview

• Gold prices fell more than 2.0% to $3,901.35 per ounce, the lowest since October 6, down from the opening level of $3,981.50, after hitting an intraday high of $4,019.80.

• On Monday, gold lost 3.2%, its second daily decline in a row, as it fell below the key $4,000-per-ounce level amid optimism surrounding global trade talks.

Trade Developments

On Sunday, senior economic officials from the United States and China held significant discussions to outline a new trade framework expected to be presented to US President Donald Trump and Chinese President Xi Jinping for final approval in the coming days.

Trump and Xi are scheduled to meet Thursday in South Korea — their first encounter of Trump’s second term — in what analysts expect to be a pivotal moment for US–China relations, particularly regarding global trade and geopolitical tensions in Asia.

Trump expressed confidence that a deal could be reached and announced a series of trade and raw-material agreements in Malaysia with four Southeast Asian countries during the first leg of his five-day Asia tour.

Federal Reserve

The Federal Reserve’s policy meeting begins later today, with a decision due Wednesday. Markets expect a 25-basis-point rate cut, marking the second consecutive reduction in benchmark US interest rates.

The post-meeting statement and comments from Fed Chair Jerome Powell are expected to provide clear guidance on whether additional rate cuts are likely before year-end.

US Interest Rates

According to CME’s FedWatch Tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at this week’s meeting, with only a 3% chance of no change.

Gold Outlook

• Tim Waterer, chief market analyst at KCM Trade, said: “Buyers who have been watching from the sidelines are beginning to take positions at these price levels. We’re also seeing some softness in the dollar, which gives gold a chance to rebound.”

• Waterer added: “If Trump and Xi hold a productive trade meeting this week, gold could stage a countertrend rise — though that might be offset if the Fed adopts a cautious tone alongside the expected rate cut.”

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 8.01 metric tons on Monday — the second consecutive daily decline — bringing the total to 1,038.92 metric tons, the lowest since October 16.

The euro rose in European trading on Tuesday against a basket of major currencies, extending its gains for the fifth consecutive session against the US dollar and reaching a one-week high, as market sentiment improved amid positive developments in US–China trade negotiations.

These gains were also supported by a weaker US dollar ahead of Wednesday’s widely expected Federal Reserve rate cut, with strong odds pointing to another reduction before the end of the year.

Renewed inflationary pressures in the eurozone have diminished expectations for the European Central Bank to cut interest rates during its meeting this week. The details of that meeting are expected to provide stronger guidance on the path of European rates for the remainder of this year and into 2026.

Price Overview

• EUR/USD rose 0.2% to 1.1667, its highest level in a week, from an opening price of 1.1644, after touching a low of 1.1644.

• The euro closed Monday up 0.15% against the dollar, marking its fourth straight daily gain amid improving risk appetite across markets.

Trade Developments

Attention is now turning to the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea on Thursday. Speaking to reporters aboard Air Force One before landing in Tokyo, Trump said, “I have great respect for President Xi, and I think we’ll reach an agreement.”

Analysts noted that signs of progress between the two countries and the possibility of the US reducing tariffs on China were enough to lift investor sentiment and boost demand for risk assets.

US Dollar

The US Dollar Index fell more than 0.2% on Tuesday, extending losses for the second straight session and reflecting continued weakness in the greenback against major and minor peers.

The dollar’s decline comes ahead of Wednesday’s expected 25-basis-point rate cut by the Federal Reserve — its second consecutive reduction — with markets also anticipating signals of another cut before year-end.

European Central Bank

• The European Central Bank meets on Wednesday and Thursday to assess the appropriate monetary stance in light of recent economic developments in the euro area.

• The bank is widely expected to keep interest rates unchanged at 2.15%, their lowest level since October 2022, marking the third consecutive meeting without a policy adjustment.

• Markets continue to look for clearer guidance on when the ECB might resume its rate-cut cycle before the end of the year.

The Japanese yen rose in Asian trading on Tuesday against a basket of major and minor currencies, rebounding from a three-week low against the US dollar and heading toward its first gain in eight sessions, ahead of the much-anticipated summit between newly appointed Prime Minister Sanae Takaichi and US President Donald Trump in Tokyo.

The talks are expected to focus on strengthening economic cooperation between the two countries, especially after the recent trade agreement that paved the way for a new phase of strategic partnership between Japan and the United States.

The Bank of Japan is also expected to discuss on Wednesday whether conditions are suitable to resume rate hikes as concerns over tariff-induced recession continue to fade.

Price Overview

• USD/JPY fell 0.45% to ¥152.16, down from the opening level of ¥152.87, after hitting an intraday high of ¥152.87.

• The yen closed Monday flat against the dollar after touching a three-week low of ¥153.26 earlier in the session. It had declined 0.2% on Friday, marking its sixth consecutive daily loss — the longest losing streak since early October.

Takaichi–Trump Summit

US President Donald Trump began his official visit to Japan on Monday and will hold a summit later today with Prime Minister Sanae Takaichi to discuss ways to boost economic and trade cooperation between the two nations.

The leaders are expected to address a wide range of regional and global issues of mutual concern, including relations with China, security in the Indo-Pacific, and the future of global supply chains.

The visit underscores both sides’ efforts to strengthen their strategic partnership and promote stability and growth across the Asian region.

Stimulative Remarks

Japan’s new economy minister, Minoru Kiuchi, said on Tuesday that a weak yen has benefits for the economy and that its negative effects can be mitigated through swift measures to ease rising living costs. He added that the new administration’s top priority is to accelerate economic growth so that its benefits can be shared more broadly among the population.

These comments highlight Prime Minister Takaichi’s focus on reviving the economy through expansionary fiscal policy — in contrast with the previous government’s emphasis on containing inflation risks from yen weakness.

Bank of Japan

• The Bank of Japan meets on Wednesday to discuss monetary policy for the world’s fourth-largest economy, with its decision due Thursday. Markets broadly expect rates to remain unchanged for the sixth consecutive meeting.

• The central bank is likely to debate whether conditions are ripe to resume interest rate hikes as fears of a tariff-related slowdown ease.

• Prime Minister Takaichi has called on the BOJ to cooperate in achieving inflation driven more by wage growth than import costs.

Economic Developments

Moody’s on Monday affirmed Japan’s sovereign credit rating at A1, citing higher tax revenues supported by resilient domestic demand and robust nominal GDP growth.

However, the International Monetary Fund cautioned that any new spending should be targeted and temporary. Krishna Srinivasan, the IMF’s Asia-Pacific director, told Reuters that Japan’s economy is expected to return to potential growth and that “there is no need for additional stimulus.”

Analysts have lifted their copper price outlook for next year following a series of mine disruptions that stoked fears of a market deficit, according to a Reuters survey.

Benchmark copper on the London Metal Exchange (LME) hit a 16-month high in October after reports of production issues in Indonesia, Congo, and Chile. Prices rose 0.8% on Monday to $5.26 per pound.

A key metal for energy and construction, copper is often seen as a barometer of global economic health and has climbed 25% since the start of the year.

The average forecast of 30 analysts now expects cash copper prices on the LME to reach $10,500 per metric ton in 2026 — 7.2% higher than the July projection of $9,796.

Matthew Sherwood of the Economist Intelligence Unit (EIU) said, “We expect copper to hold onto recent gains and extend them into 2026 and beyond. The latest developments suggest the refined copper market will tighten sooner than we previously anticipated.”

Indonesia’s Grasberg mine — the world’s second-largest copper producer — halted operations last month after mudslides killed seven workers.

Such incidents have shifted forecasts from a 40,000-ton surplus to a 124,000-ton deficit in 2025, according to the latest survey, with the shortfall expected to widen to 150,000 tons in 2026.

China nears aluminum output cap

Aluminum prices, used in transport, construction, and packaging, have risen 14% so far this year on supply concerns, as China — the world’s largest producer — approaches its official output ceiling of 45 million tons per year.

Sukdaksina Unnikrishnan of Standard Chartered said, “From both cost and supply perspectives, several factors are likely to support aluminum prices over the medium to long term, and demand prospects remain positive, particularly from the renewable-energy sector.”

Analysts expect LME cash aluminum to average $2,679 per ton in 2026, up 3% from the previous forecast, while trimming the projected market surplus to 250,000 tons from 281,500 tons previously.

Zinc supply recovery expected

Although LME zinc inventories — mainly used for galvanizing steel — have plunged 85% since the start of the year, prices have remained relatively stable, as analysts argue that declining stockpiles do not fully reflect global supply conditions.

Nana Adwoa Serboh of RBC said, “We expect mine supply to improve as new projects such as Kipushi come online, which could help keep prices contained.”

Analysts now forecast cash zinc prices to average $2,838 per ton in 2026, up 2.2% from July’s projection, with the expected global surplus rising to 239,000 tons from 201,500 previously.