Gold prices rose in European trading on Thursday, resuming gains after a two-day pause and moving back toward a six-week high. The metal is drawing support from the ongoing decline in the US dollar, which remains under pressure as expectations grow for an interest-rate cut by the Federal Reserve next week.

To reassess those expectations, investors are awaiting more key US economic data, particularly Friday’s release of the Personal Consumption Expenditures report.

Price Overview

• Gold prices today: Gold rose 0.35% to $4,216.90, up from the opening level of $4,202.58, after touching an intraday low of $4,175.06.

• At Tuesday’s settlement, gold fell 0.1%, marking a second straight daily loss amid continued profit-taking from the six-week high of $4,264.60 per ounce.

US Dollar

The US Dollar Index fell 0.1% on Thursday, extending its decline for a ninth consecutive session and hitting a five-week low of 98.80 points, reflecting persistent weakness in the currency against a basket of major currencies.

The latest drop follows weak economic data and cautious comments from Federal Reserve officials, both of which have boosted expectations of a December rate cut.

US Interest Rates

• US private-sector payrolls recorded their largest monthly decline in more than two and a half years in November.

• After the data, CME’s FedWatch tool showed the probability of a 25-basis-point rate cut in December rising from 87% to 89%, while the likelihood of no change fell from 13% to 11%.

• Investors are monitoring incoming data closely ahead of next week’s decision, with weekly jobless claims scheduled for release today and the PCE report due on Friday.

Gold Outlook

Sonia Komari, commodities strategist at ANZ, said that with investors cautious ahead of the FOMC meeting, the market largely expects a 25-basis-point rate cut. “What the market needs now is a fresh catalyst for another leg higher in gold,” she noted.

Komari added that profit-taking remains present, and any pullback toward $4,000 is likely to attract renewed buying, given the strong underlying support for the precious metal.

SPDR Gold Trust

Holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 1.72 metric tons on Wednesday, marking a second consecutive daily decline and bringing total holdings down to 1,046.58 metric tons.

The euro declined in European trading on Thursday against a basket of global currencies, marking its first drop in four sessions against the US dollar and pulling back from a seven-week high as traders moved to take profits and initiate corrective positioning.

Fresh data from the euro area showed an expansion in business activity in November, signaling accelerating growth in the fourth quarter. This improvement has strengthened market confidence in the region’s ability to exit its period of economic weakness and may pave the way for a more hawkish stance from the European Central Bank in upcoming meetings.

Price Overview

• EUR/USD fell by 0.152% to 1.1653, down from today’s opening level of 1.1671, after hitting an intraday high of 1.1674.

• The euro ended Wednesday’s session up 0.4% against the dollar, its third straight daily gain, and touched a seven-week high at 1.1678 following strong European data and weaker US figures.

Business Activity Expands

Data released on Wednesday showed eurozone business activity growing at its fastest pace in two and a half years in November, as strength in the services sector offset relative softness in manufacturing.

Analyst Commentary

• Steve Englander, head of global G10 FX research at Standard Chartered in New York, said the market is beginning to take note of the steady stream of stronger European data.

• Englander added that optimism surrounding a potential end to the Russia-Ukraine war is supporting gains in several European currencies, particularly the euro and the British pound.

Christine Lagarde

During a session before the European Parliament’s Economic and Monetary Affairs Committee, ECB President Christine Lagarde said on Wednesday that the eurozone economy is showing signs of recovery. Household spending is rising and the labor market remains resilient, providing support for economic activity despite ongoing challenges.

Lagarde noted that underlying inflation indicators remain aligned with the ECB’s medium-term target of 2%, and she expects inflation to stay near that level in the coming months.

European Interest Rates

• Data released this week showed an unexpected rise in headline inflation in the eurozone during November, highlighting persistent price pressures facing the ECB.

• Following the inflation report, market pricing for a 25-basis-point ECB rate cut in December fell sharply from 25% to just 5%.

• Sources told Reuters that the ECB is likely to keep rates unchanged at its December meeting.

• Investors are now awaiting further economic data from the eurozone ahead of the 17–18 December policy meeting, which will be key in recalibrating rate expectations.

The Australian dollar rose in European trading on Thursday against a basket of major currencies, extending gains for a third consecutive session against the US dollar and reaching its highest level in five weeks, as buying momentum strengthened amid fading expectations that the Reserve Bank of Australia will cut interest rates at next week’s policy meeting.

Market expectations for stronger economic performance in Australia during the fourth quarter have grown, alongside a renewed acceleration in prices and an uptick in inflation — factors that increase pressure on policymakers at the RBA and support a more hawkish policy stance to counter resurgent inflation and maintain price stability.

Price Overview

• AUD/USD climbed 0.2% to 0.6615, the highest since 29 October, up from today’s opening level of 0.6601, after touching an intraday low of 0.6599.

• The Australian dollar ended Wednesday’s session up 0.55% against the US dollar, marking its second consecutive gain amid improving risk appetite across global markets.

Australian Interest Rates

• Recent data from Australia showed a decline in unemployment and an increase in new jobs in October, highlighting ongoing tight conditions in the labor market.

• These figures strengthened expectations of improving economic activity in the fourth quarter, coinciding with a renewed rise in inflation and price pressures.

• As a result, the likelihood of an RBA rate cut at next week’s final meeting of the year has diminished significantly.

• Market pricing currently places the probability of a 25-basis-point rate cut in December at just 10%.

Kevin Hassett, director of the National Economic Council, is seen by prediction markets as the frontrunner to replace Federal Reserve Chair Jerome Powell.

Bonds have long served as a stabilizing force for investors, offering diversification and protection in periods of equity volatility. But that role could come under threat — however unlikely — if President Donald Trump selects his top White House economist, Kevin Hassett, to lead the Federal Reserve.

Lawrence Gillum, chief fixed-income strategist at Charlotte-based brokerage LPL Financial, warns that a Fed under Hassett might prioritize economic growth over price stability. Such a shift could unanchor inflation expectations and undermine the usefulness of bonds within diversified portfolios. Gillum describes this as a “non-base case,” but one that deserves attention.

“We believe inflation will ultimately return to 2% and that the Fed will remain a credible institution,” Gillum said in a phone interview Tuesday. “For now, rate markets seem comfortable with the prospect of a Hassett appointment. But if markets sense that policy is tilting more toward growth at the expense of inflation control, it would put bonds in a difficult position.”

Bonds’ traditional role under pressure

For decades, bonds have balanced equity volatility during periods of market stress, forming the defensive anchor of the classic 60/40 portfolio used by moderate-risk investors.

But that stability depends on a low-inflation backdrop and a central bank committed to price stability. Rising inflation erodes the real value of bonds’ fixed cash flows, while a central bank more focused on boosting growth tends to keep rates lower for longer than economic conditions justify.

Investors saw these dynamics firsthand in 2022, when both stocks and bonds fell sharply. It marked one of the worst years in history for the traditional 60/40 mix, and the usual negative correlation between the two asset classes has struggled to re-establish itself since.

Hassett emerges as Trump’s likely pick

Over the weekend, Trump said he knows whom he will select to lead the Federal Reserve but declined to reveal whether that person is Hassett, who currently heads the National Economic Council.

Prediction markets such as Kalshi and Polymarket have assigned at least an 80% probability to Hassett becoming Trump’s choice, as of Tuesday. In a CBS “Face the Nation” interview aired Sunday, Hassett said he was proud to be considered but denied a Bloomberg report describing him as the clear favorite.

Hassett’s public comments suggest he strongly favors deeper rate cuts. In November, he told Fox News that if he were Fed chair, he “would be cutting rates right now.” Last month, at a Washington Economic Club event, he advocated a 50-basis-point cut and agreed with Trump that interest rates could be “much lower.”

A calm market — for now

So far, markets have reacted calmly to the possibility of Hassett taking over the Fed. Market-based inflation expectations have risen only slightly since Sunday, and the Treasury yield curve has steepened only modestly — signaling limited investor concern at this stage.

Gillum said he is watching the five-year breakeven inflation rate — a measure of expected inflation over the next five years — which stood around 2.3% on Tuesday. But he warned that if it rises meaningfully toward 3%, with incremental moves toward 2.5% and 2.7% over several weeks, it would become “a problem.” Much will depend, he said, on whether Hassett would be “determined to cut rates regardless of inflation.”

Gillum added that the larger risk is a break from past Fed norms: “If Hassett’s appointment signals a shift toward prioritizing the growth mandate over price stability, then bonds fall apart.” Still, he noted, “It’s a warning signal, not something we expect to happen — at least not immediately.”

Recent market performance

On Tuesday, trading in the bond market was relatively subdued, with most Treasury yields little changed — except for one-month and two-month bill yields, which fell 7 and 10 basis points respectively to 3.84% and 3.75%, as traders increased bets on another rate cut next week and again in January.

Major equity benchmarks — the Dow Jones, S&P 500, and Nasdaq — all closed higher.