Gold prices rose in European trade on Thursday and expanded the gains for the second day towards record highs on haven demand, as US President Donald Trump plans more trade tariffs.

Gold’s gains are also boosted by the dollar's decline as investors pull back to monitor the market.

Prices

Gold prices rose 0.65% to $2922 an ounce, with a session-low at $2900.

On Wednesday, gold rose 0.2%, resuming gains and approaching a record high at $2942.

Trump’s Tariffs

President Donald Trump announced plans to impose reciprocal tariffs on any country that imposes tariffs on US imports, triggering concerns about an escalating global trade war.

Such a step will no doubt lead to retaliatory measures from other governments and could damage global sentiment and growth.

US Dollar

The dollar index fell 0.4% on Thursday against a basket of major rivals, underpinning the greenback-denominated commodity futures.

It comes after Trump ordered government officials to commence talks in order to end the war in Ukraine.

US Rates

Fed Chair Jerome Powell told Congress on Wednesday that the Fed’s fight with inflation isn’t over yet, and that any more rate cuts will have to wait until inflation is clearly heading towards the 2% target.

US consumer prices rose past estimates in January in another sign of renewed inflationary pressures on the Fed’s policymakers.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in March fell from 5% to 2.5%.

Now traders await important US data on producer prices and unemployment claims to gather more clues.

SPDR

Gold holdings at the SPDR Gold Trust fell 5.44 tons yesterday to a total of 866.50 tons, away from January 17 highs at 871.94 tons.

UK GDP grew 0.4% in December, beating estimates of a 0.1% growth rate, and up from a 0.1% growth rate in November. 

UK GDP growth clocked in at 0.1% in the fourth quarter of 2024, beating estimates of a 0.1% contraction, and compared to a flat growth in the third quarter.

Sterling rose in European trade on Thursday against the dollar, resuming gains after important UK growth data for the last quarter of last year.

The data could provide fresh pricing for the odds of a UK interest rate cut in March, with markets still expecting such a cut as inflation cools.

The Price

The GBP/USD pair rose 0.45% today to $1.2497, the highest since February 6, with a session-low at $1.2439.

The pound lost 0.1% yesterday after a 0.65% surge in the previous day as the risk appetite improved.

UK Rates

Bank of England Governor Andrew Bailey warned that the UK economy is slowing down, and expressed concerns about global trade tensions which could impact the economic outlook.

The odds of a BOE interest rate cut in March are currently standing at 70%.

Interest rate futures estimate 65 basis points of total BOE rate cuts by the end of 2025.

Now traders await official UK growth data later today for the last quarter of 2024 and for December separately. 

UK GDP growth is estimated down 0.1% in the fourth quarter of 2024, and up 0.1% in December.