Gold prices declined in European trade on Friday away from a week high on profit-taking, and under pressure from the stronger US dollar in the forex market.

The dollar continues to be boosted following the bullish outlook by the Federal Reserve at its last policy meeting of 2024.

The Price

Gold prices fell 0.35% today to $2625 an ounce, with a session-high at $2638.

On Thursday, gold prices rose 0.65%, the second profit in a row, hitting a week high at $2639.19 on haven demand.

The Dollar

The dollar index rose over 0.1% on Friday, resuming gains and approaching two-week highs against a basket of major rivals.

Thursday data showed US unemployment claims hit a month low last week, indicating continued strength and resilience in the labor market, which would likely convince the Federal Reserve to hold interest rates steady for an extended duration in 2025.

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in January stood at just 90%, with investors now waiting for important US inflation and labor data to gather more clues.

San Francisco Fed President Mary Dale and two other Fed policymakers said last week the Fed needs to resume rate cuts next year but might take its time, as the recalibration duration has ended.

SPDR 

Gold holdings at the SPDR Gold Trust fell 1.15 tons yesterday to a total of 872.80 tons.

Euro fell in European trade on Friday against a basket of major rivals, resuming losses after a short hiatus against the dollar and heading for the fourth weekly decline in a row amid concerns about a wider US-eurozone interest rate gap.

Recent bearish remarks by European Central Bank President Christine Lagarde boosted the odds of another ECB rate cut in January.

The Price 

The EUR/USD pair fell 0.15% today to $1.0405, with a session-high at $1.0426.

The pair closed up 0.3% on Thursday, the first profit in three days amid thin holiday trading.

Weekly Trading

Euro is down 0.25% so far this week against the dollar, heading for the fourth weekly loss in a row.

Rate Gap

The eurozone-US interest rate gap is now standing at 135 basis points in favor of the US, and will likely expand to 160 basis points in January, in turn boosting the greenback.

Lagarde

European Central Bank President Christine Lagarde said the eurozone is approaching its medium-term inflation target according to an interview with the Financial Times.

In earlier remarks, Lagarde said the ECB will cut interest rates more aggressively if inflation continues to slow down towards 2%.

She said that the eurozone is very much approaching the stage where the ECB  can announce the achievement of the 2% inflation target,

European Rates

Following the remarks, the odds of a 0.25% ECB interest rate hike rose from 55% to 65%.

Markets are betting the ECB will cut interest rates by 1.75% throughout 2025, while waiting for important eurozone growth, inflation, and unemployment data to gather more clues.

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in January stood at just 90%, with investors now waiting for important US inflation and labor data to gather more clues.

The Japanese yen rose in Asian trade on Friday on track for the first profit in four days against the US dollar, amid attempts to recover from five-month lows following upbeat Japanese data. 

The data and bullish remarks from BOJ governor Kazuo Ueda boosted the odds of a Japanese interest rate hike in January.

Despite today’s gains, the yen is nonetheless heading for its fourth weekly loss in a row on renewed concerns about the Japan-US interest rate gap, following the Federal Reserve’s latest bullish policy meeting.

The Price 

The USD/JPY pair fell 0.3% today to 157.50 yen per dollar, with a session-high at 157.95.

The yen lost 0.4% against the dollar yesterday, marking the third loss in a row and hitting a five-month trough at 158.08 on higher US yields.

Strong Data

Earlier Tokyo data showed core inflation rose 2.4% y/y in December, the fastest increase in four months, up from 2.2% in November.

This reflects the accelerating pace of price increases and inflationary pressures on policymakers, which boosts the odds of a January rate hike.

Japan’s retail sales also rose 2.8% in November, beating estimates of 1.5%, and up from 1.3% in October, in another sign of strong growth for the Japanese economy in the fourth quarter.

Ueda 

Bank of Japan Kazuo Ueda said the bank expects the economy to approach its 2% inflation target sustainably next year.

Japanese Rates

Following the data and statements, the odds of a BOJ January 0.25% interest rate hike rose from 55% to 65%.

Weekly Trades

The yen is down 0.75% so far this week against the dollar, about the mark the fourth weekly loss in a row.

The losses are due to mounting concerns about the Japan-US interest rate gap following the Federal Reserve’s last policy meeting, which was more aggressive than expected and put out forecasts for only two interest rate cuts in 2025, down from four in previous forecasts. 

Most cryptocurrencies lost ground on Thursday amid thin trading as Wall Street resumed operations after yesterday’s holiday, but some markets were still closed in Europe. 

Investors are now preparing for the New Year holiday, which would entail a reorganization of their investment portfolios, and maybe liquidation of some assets.

Earlier US data showed unemployment claims fell by a thousand last week to 219 thousand, while analysts expected 223 thousand.

The International Bank raised its outlook for Chinese GDP growth in both 2024 and 2025, buoyed by Beijing’s decisions to boost fiscal spending and stabilize the real estate market.

Ethereum

On trading, ethereum fell 4.5% on Coinmarketcap as of 20:35 GMT to $3319.5. 

Ripple 

Ripple lost 7% as of 20:35 GMT on Coinmarketcap to $2.15.