Gold prices fell in the European market on Wednesday, deepening their losses for the second consecutive day and recording their lowest levels in two weeks, on track to retest the historic psychological barrier of $4,000 per ounce, under pressure from the broad rise in the US dollar.

Amid elevated pricing for the likelihood of US interest rate hikes this year, especially following the Federal Reserve's latest hawkish meeting under Kevin Warsh, markets are awaiting the release of the US Personal Consumption Expenditures report for May on Thursday.

The Price

• Gold prices today: Gold prices fell by 1.5% to $4,050.49 per ounce, the lowest level since June 11, from an opening level of $4,110.75, and recorded a session high of $4,115.16.

• At Tuesday's settlement, gold prices lost 1.95%, marking their fourth loss in the last five trading days, due to pressure from the stronger dollar supported by aggressive Federal Reserve expectations.

US dollar

The US Dollar Index rose 0.3% on Wednesday, extending gains for a third consecutive session and hitting a 13-month high of 101.69 points, reflecting the continued rise of the US currency against a basket of major and secondary currencies.

As we know, a stronger US dollar makes dollar-denominated gold bullion less attractive to buyers holding other currencies.

The US dollar is rising thanks to demand for the currency as the best available investment, amid a steady stream of strong US economic data that supports the Federal Reserve's inclination toward higher interest rates, and as an alternative investment amid the heavy selloff in global technology stocks.

US interest rates

• Chicago Federal Reserve President Austan Goolsbee said that with the labor market remaining stable, policymakers are focused on determining whether elevated inflation will persist or ease as the impact of higher tariffs fades and if a solution is reached to the Middle East conflict.

• According to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at the July meeting currently stands at 64%, while the probability of a 25-basis-point rate hike stands at 36%.

• The probability of the Federal Reserve leaving rates unchanged at the December meeting currently stands at 14%, while the probability of a 25-basis-point rate hike stands at 86%.

• To reprice those expectations, investors are closely monitoring additional US economic data, along with comments from Federal Reserve officials.

• The US Personal Consumption Expenditures report will be released on Thursday. It is the Federal Reserve's preferred inflation gauge and is expected to provide further clues about the path of monetary policy this year.

Gold outlook

Financial markets strategist Ilya Spivak said: "What we are seeing now is the evolution of the pressure that gold has faced as a result of the war's aftermath. The inflation dynamic that leads to higher interest rates is now clearly being reflected in markets through falling bond prices, rising yields, a stronger US dollar, and lower gold prices."

Spivak added: "If markets remain primarily focused on inflation and the $4,000 level is broken to the downside, prices could move toward $3,800. At that point, discussions may begin about the possibility of testing $3,500 as the next target."

SPDR Fund

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, declined by 4.57 metric tons on Tuesday, bringing total holdings down to 1,017.63 metric tons, the lowest level in one week.

The euro fell in European trading on Wednesday against a basket of global currencies, extending its losses for a third consecutive session against the US dollar and hitting its lowest level in a year, as investors continued to favor the greenback as the most attractive currency and alternative investment in the foreign exchange market.

With global oil prices declining, inflationary pressures on European Central Bank policymakers are easing, reducing the likelihood of another ECB interest rate hike later this year.

The Price

• Euro exchange rate today: The euro fell about 0.2% against the dollar to $1.1361, its lowest level since June 2025, from an opening level of $1.1381. The session high was recorded at $1.1384.

• The euro ended Tuesday down 0.4% against the dollar, marking a second consecutive daily decline following the release of strong US economic data.

US dollar

The US Dollar Index rose more than 0.1% on Wednesday, extending gains for a third straight session and reaching a 13-month high of 101.51 points, reflecting continued strength in the US currency against a basket of global peers.

The advance is being driven by demand for the dollar as the most attractive available investment amid a steady stream of strong US economic data, which supports the Federal Reserve's inclination toward higher interest rates.

The dollar is also benefiting as an alternative safe-haven investment amid the ongoing selloff in global technology stocks.

Global oil prices

Global oil prices fell nearly 1% on Wednesday, deepening losses for a third consecutive session and touching their lowest levels in three months amid expectations of smoother crude flows through the Strait of Hormuz.

Lower oil prices help reduce concerns about accelerating inflation, reinforcing the case for the European Central Bank to leave monetary policy settings unchanged for an extended period this year.

European interest rates

• Reports suggest that the European Central Bank is considering pausing monetary policy normalization in July if energy prices remain at current levels.

• Money market pricing for a 25-basis-point ECB rate hike in July remains stable at around 30%.

• To reassess those expectations, investors are awaiting additional eurozone economic data, particularly inflation, unemployment, and wage figures.

The Japanese yen edged higher in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover from a two-year low against the US dollar amid modest bargain-buying activity at lower levels.

So far, the latest round of verbal warnings from Japanese officials has done little to ease pressure on the currency, as wide interest rate differentials between the United States and Japan persist, while markets remain uncertain about Tokyo's willingness to intervene.

The Price

• Japanese yen exchange rate today: The dollar fell around 0.1% against the yen to ¥161.45, from an opening level of ¥161.57. The session high was recorded at ¥161.63.

• The yen ended Tuesday little changed against the dollar after hitting a two-year low of ¥161.93 on Monday, close to its 40-year low of ¥161.95.

US dollar

The US Dollar Index rose more than 0.1% on Wednesday, extending gains for a third consecutive session and reaching a 13-month high of 101.51 points, reflecting continued strength in the US currency against a basket of global peers.

The advance has been driven by demand for the dollar as the most attractive available investment, supported by a series of strong US economic data releases that reinforce the Federal Reserve's inclination toward higher interest rates.

The dollar is also benefiting as an alternative safe-haven investment amid the ongoing selloff in global technology stocks.

Japanese authorities

Japanese authorities continue to closely monitor currency market movements as the yen approaches its weakest levels in 40 years after breaking above the key ¥160-per-dollar threshold, a level widely viewed as a potential trigger for renewed intervention.

Japanese Finance Minister Satsuki Katayama held an online meeting with US Treasury Secretary Scott Bessent late Monday amid growing concerns about sharp currency fluctuations.

According to Reuters sources, the discussions focused on policy options for addressing the yen's historic weakness, including the possibility of foreign exchange market intervention.

Katayama reiterated on Monday that government authorities are fully prepared to take decisive action and intervene directly in currency markets at any time to protect the yen from speculative moves.

Views and analysis

• Matt Simpson, Senior Market Analyst at StoneX, said Japan's Ministry of Finance may be increasingly concerned about the dollar-yen exchange rate climbing to its highest level of 2024.

• Simpson added that authorities may also feel unable to do much about it, as intervention against a hawkish Federal Reserve and strong US economic data could prove costly and ineffective.

• Former Bank of Japan board member Sayuri Shirai said the yen could weaken to ¥165 per dollar if the Federal Reserve raises interest rates this year.

Japanese interest rates

• The summary of opinions from the Bank of Japan's June monetary policy meeting, released on Wednesday, showed that some board members called for further monetary tightening to move the central bank's policy rate toward levels considered neutral for the economy.

• Market pricing for a quarter-point rate hike at the Bank of Japan's July meeting remains below 25%.

• Investors are awaiting additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.

US President Donald Trump's renewed threats to strike Iran, combined with Iranian negotiators once again walking away from talks in Switzerland, have revived uncertainty surrounding the future of one of the world's most critical oil transit routes.

Although negotiations continue to make progress, uncertainty over global oil supply security remains elevated due to the risk environment surrounding the Strait of Hormuz—an issue that many market participants appear to be overlooking.

Some social media users have even begun referring to Hormuz as "Schrödinger's Strait," and for good reason. The issue is no longer simply whether ships can pass through unhindered by Iranian forces or a potential US blockade. It is also about whether shipping companies, insurers, banks, and other participants in the oil trade can reliably track cargo movements and verify the safety of shipping routes.

Energy analytics firm Kpler recently argued that the risks stemming from the conflict involving the United States, Israel, and Iran go well beyond the question of whether the strait is technically open or closed. The ability to monitor tanker traffic has become a critical component in assessing overall risk.

Most media coverage and market analysis surrounding the Strait of Hormuz focuses on a simplified narrative built around two outcomes: open or closed. However, Kpler trade-risk analyst Ana Subasic warned last week that this framework is misleading because many other factors influence the situation.

She noted that oil cargoes require reliable tracking throughout their journey for both insurance and sanctions-compliance purposes.

"A vessel may be able to transit the strait," Subasic said, "but if its movements cannot be reliably monitored due to degraded or manipulated positioning data, the voyage record becomes questionable. Port-entry verification fails, risk mapping breaks down, and reconstructing the vessel's route becomes subject to dispute."

Such information is essential for all parties involved in oil shipments. Yet the market has largely ignored these concerns while focusing on the simplistic "open versus closed" narrative that directly influences oil futures prices.

In the physical oil market, however, these details often matter far more than whether the strait is technically open. This reality has frequently been reflected in significant divergences between futures prices and physical crude delivery prices.

The situation may become even more complicated in the months ahead.

Lloyd's List reported last week that Iran has introduced a mandatory insurance system for all vessels passing through the Strait of Hormuz, to be administered by a newly established Persian Gulf Strait Authority.

According to the report, insurance coverage will initially be provided free of charge, though that arrangement is not expected to last indefinitely.

The publication cited an Iranian document stating:

"Insurance will initially be provided free of charge to vessel owners, with all costs covered by the Islamic Republic of Iran. The Persian Gulf Strait Authority reserves the right to impose insurance fees in the future, at which point vessel owners will be required to purchase and renew the necessary coverage."

The new authority will also be the sole body authorized to issue transit permits and determine the routes vessels must follow while navigating the strait.

Lloyd's List quoted one tanker owner as saying: "This is madness. The whole situation has become chaotic."

The development illustrates just how complex the reality has become and why focusing solely on whether the strait is open or closed fails to capture the full picture.

As Subasic explained, the more important questions are: "Who is transiting the strait? When are they transiting? Under what level of risk? And does that risk create exposure for voyage stakeholders such as shipowners, charterers, insurers, banks, and cargo receivers?"

Before the initial US and Israeli strikes on Iran, this information was generally available to all market participants. Today, significant gaps have emerged in the data.

Insurers and banks are particularly uncomfortable with such information gaps, especially amid an active military conflict, a complex sanctions regime, and heightened maritime security risks.

The result is higher insurance costs, as uncertainty and limited visibility increase the expense of transporting oil cargoes.

Malaysia's New Straits Times recently reported that insurance costs for a very large crude carrier (VLCC) sailing from the Persian Gulf previously ranged between $150,000 and $225,000 per voyage before the conflict.

Following the outbreak of hostilities, those costs surged to between $5 million and $7.5 million per voyage.

Yet these dramatic cost increases may not represent the biggest long-term challenge. The more significant issue lies in the persistent information gaps highlighted by Subasic.

Those gaps are likely to keep uncertainty surrounding oil transportation through the Strait of Hormuz elevated for some time, regardless of how much progress peace negotiations make or what outcomes emerge in the coming weeks.

The fact that these additional risks have not been fully reflected in oil futures markets also provides further evidence of the growing disconnect between the physical oil market and the paper-trading market.