Gold prices declined in European trading on Tuesday for the first time in five sessions, retreating from a five-week high due to corrective activity and profit-taking, alongside broad strength in the US dollar against a basket of global currencies.

With the probability of a US rate cut in March fading, traders are closely watching a series of key US labor market data releases this week, which the Federal Reserve heavily relies on in determining its monetary policy path for the year.

Price Overview

• Gold prices today: Gold fell 1.8% to $5,226.51, down from the session open at $5,322.07, after touching a high of $5,379.94.

• At Monday’s settlement, gold rose 0.8%, marking a fourth consecutive daily gain and hitting a five-week high of $5,419.37 per ounce, following US-Israeli strikes on Iran.

US Dollar

The US dollar index rose 0.65% on Tuesday, extending gains for a second straight session and reaching a one-and-a-half-month high of 99.18, reflecting continued strong performance of the US currency against major and minor peers.

As is well known, a stronger US dollar makes dollar-denominated gold less attractive to buyers holding other currencies.

The sustained rally in the dollar comes amid safe-haven buying as the Iran war enters its fourth day, with mounting fears of a broader regional escalation. Rising energy prices are adding further downside pressure on the global economy.

US Interest Rates

• Federal Reserve Governor Christopher Waller said last week he is open to keeping interest rates unchanged at the March meeting if February employment data indicates the labor market has “stabilized” after weak performance in 2025.

• According to CME Group’s FedWatch tool, markets price a 96% probability that US interest rates will remain unchanged in March, while the odds of a 25-basis-point cut stand at 4%.

• Investors are closely monitoring additional key US labor market data this week, particularly the monthly jobs report scheduled for release on Friday, to reassess these expectations.

Gold Outlook

KCM Trade Chief Market Analyst Tim Waterer said the scope and duration of the conflict remain largely unclear, and as long as that uncertainty persists, gold continues to capture the bulk of safe-haven demand.

Waterer added that gold prices might have risen further if not for the strengthening US dollar since the escalation of the conflict. Inflation concerns are currently front and center for traders, given the direction of oil prices and reduced shipping volumes through the Strait of Hormuz.

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were little changed on Monday, keeping the total at 1,101.33 metric tons — the highest level since April 21, 2022.

The euro weakened in European trading on Tuesday against a basket of global currencies, extending losses for a second consecutive session against the US dollar and hitting a six-week low, as investors continued to favor the greenback as a safe-haven asset amid escalating geopolitical tensions and intensifying military confrontations between the United States and Israel on one side and Iran on the other.

The single currency is also pressured by concerns over rising global energy prices due to the Iran war, which could hinder the European Union’s ability to replenish fuel reserves as inventories decline to record lows.

Later today, traders await the release of euro area headline inflation data for February, which is expected to provide stronger clues on the European Central Bank’s interest rate path this year.

Price Overview

• EUR/USD fell 0.2% to $1.1662, the lowest level since January 20, down from the session open at $1.1687, after touching a high of $1.1707.

• The euro ended Monday down 1.1% against the dollar, marking its largest daily loss since July 30, 2025, amid fallout from the Iran war.

US Dollar

The US dollar index rose 0.2% on Tuesday, extending gains for a second straight session and reaching a one-and-a-half-month high of 98.77, reflecting continued strong performance of the US currency against a basket of major and minor peers.

The ongoing rally is driven by safe-haven demand as the Iran war enters its fourth day, with mounting fears of a broader regional escalation. Rising energy prices are adding further negative pressure on the global economy.

Developments in the Iran war

• President Donald Trump said the war could last for weeks and that it remains unclear who would take control in Iran following the death of Supreme Leader Ayatollah Ali Khamenei.

• Israeli Prime Minister Benjamin Netanyahu sought to calm concerns over the timeline, telling Fox News it would not be an “endless war.”

• Saudi Arabia’s defense ministry said in a post on X, citing a preliminary assessment, that two drones targeted the US embassy in Riyadh, causing a limited fire and some damage.

European Interest Rates

• Money markets price the probability of a 25-basis-point rate cut by the European Central Bank in March at around 25%.

• Traders have revised expectations from keeping rates unchanged throughout the year to at least one 25-basis-point cut.

Inflation in Europe

To reassess expectations for rate cuts this year, investors will focus later today on euro area headline inflation data for February, which will indicate the extent of inflationary pressures facing ECB policymakers.

At 10:00 GMT, annual euro area CPI is expected to rise 1.7% in February, unchanged from the previous reading, while core inflation is forecast at 2.2%, in line with the prior figure.

Euro outlook

At FX News Today, we expect that if inflation data comes in softer than currently anticipated, expectations for ECB rate cuts this year will increase, implying further downside pressure on the euro in the foreign exchange market.

The Japanese yen weakened in Asian trading on Tuesday against a basket of major and minor currencies, extending losses for a second consecutive session against the US dollar and nearing its lowest level in six weeks, as investors continued to favor the dollar as a preferred safe-haven asset amid escalating concerns over a widening military conflict in the Middle East.

The currency’s decline prompted a warning from Japan’s finance minister about the possibility of intervening in the foreign exchange market to support the yen. Meanwhile, downbeat labor market data reduced the likelihood of a near-term interest rate hike in Japan.

Price Overview

• USD/JPY rose about 0.2% to ¥157.60, up from the day’s opening level of ¥157.35, after touching an intraday low of ¥157.18.

• The yen ended Monday down 0.9% against the dollar, marking its largest daily loss since February 18 and hitting a six-week low of ¥157.75, driven by the intensifying Iran war.

US Dollar

The US dollar index rose more than 0.15% on Tuesday, holding gains for a second straight session and trading near a one-and-a-half-month high, reflecting continued strength in the US currency against a basket of global peers.

The strong performance comes as investors turn to the dollar as a safe-haven asset, with the Iran war entering its fourth day and fears mounting over a broader regional escalation. Rising energy prices are adding further pressure on the global economy.

Developments in the Iran war

• President Donald Trump said the war could last for weeks and that it remains unclear who would take control in Iran following the death of Supreme Leader Ayatollah Ali Khamenei.

• Israeli Prime Minister Benjamin Netanyahu sought to ease concerns over the timeline, telling Fox News it would not be an “endless war.”

• Saudi Arabia’s defense ministry said in a post on X, citing a preliminary assessment, that two drones targeted the US embassy in Riyadh, causing a limited fire and some damage.

Japanese Finance Minister

Finance Minister Satsuki Katayama said financial authorities are closely monitoring markets with a “strong sense of urgency.” When asked about possible currency intervention, she noted that Japan had reached a mutual understanding with the United States last year.

Japanese Interest Rates

• Japan’s unemployment rate rose to 2.7% in January, above market expectations of 2.6%, compared with 2.6% in December.

• Market pricing for a 25-basis-point rate hike by the Bank of Japan in March fell from 15% to 5%.

• Pricing for a similar move in April declined from 40% to 25%.

• In the latest Reuters poll, the Bank of Japan is expected to raise interest rates to 1% by September.

• Analysts at Morgan Stanley and MUFG said in a joint research note that while they had already viewed the probability of a March or April hike as low, rising uncertainty linked to developments in the Middle East is likely to push the Bank of Japan toward a more cautious stance, further reducing the likelihood of near-term tightening.

Investors are awaiting additional data on inflation, unemployment, and wages in Japan to reassess these expectations.

Gold prices rose during Monday’s trading despite a notable advance in the US dollar against most major currencies, as geopolitical fears and the outbreak of war in the Middle East pushed investors toward safe-haven assets.

The US–Israeli strikes resulted in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei, in a development seen as a major turning point for the Islamic Republic and one of the most consequential events since 1979.

In response, Iranian officials vowed a strong retaliation, increasing concerns over a broader regional conflict, especially after explosions were reportedly heard in several cities across Gulf countries.

US President Donald Trump said in an interview with CNBC that American military operations in Iran were progressing ahead of schedule.

Meanwhile, concerns that expanding automation could undermine business models and trigger waves of layoffs continue to raise worries about potential impacts on the broader economy.

Trump also hinted at a “major wave” of additional attacks without revealing details, saying he expected the “Iran operation” to last between four and five weeks and that the US had the capacity to continue “much longer than that.”

The US dollar index rose by 1% to 98.6 points at 20:32 GMT, recording a session high of 98.7 and a low of 97.7.

In trading, spot gold contracts climbed 2% to $5,354.4 per ounce by 20:33 GMT.