Gold prices fell by more than 1% in European trading on Tuesday, slipping below the $5,000 per ounce level, and heading toward their first loss in the past three sessions, under pressure from a rebound in the US dollar ahead of key US economic data releases.

A series of critical US economic reports is expected to provide strong signals about the future path of Federal Reserve interest rates, especially as markets still rule out a rate cut in March.

Price overview

• Gold prices today: Gold fell by 1.4% to $4,987.68, from the opening level at $5,058.68, and recorded a session high at $5,076.01.

• At Monday’s settlement, gold prices rose by 1.9%, marking the second consecutive daily gain, supported by weakness in the US dollar.

The US dollar

The US Dollar Index rose by more than 0.1% on Tuesday, as part of recovery attempts from a two-week low, reflecting a rebound in the US currency against a basket of global currencies.

Aside from buying from low levels, the dollar’s rebound comes as investors refrain from opening new short positions ahead of a batch of important US economic data.

US interest rates

• San Francisco Federal Reserve President Mary Daly said on Friday that she believes one or two additional rate cuts may be needed to address weakness in the labor market.

• According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the March meeting stands at 83%, while the probability of a 25 basis point rate cut is priced at 17%.

• To reprice these expectations, investors are closely watching upcoming US economic data, in addition to monitoring comments from Federal Reserve officials.

• US retail sales data is due later today, the delayed jobs report will be released on Wednesday, weekly jobless claims on Thursday, and key inflation data for January on Friday.

• White House economic adviser Kevin Hassett said on Monday that US job gains may be lower in the coming months due to slower labor force growth and higher productivity.

Gold outlook

Market strategist Ilya Spivak said that the cold war and economic competition between the United States and China are likely to persist for years, meaning gold maintains a broader upward bias, with the key question being how short-term Federal Reserve policy expectations will affect prices.

He added that gold is pulling back toward the $5,000 per ounce level from its recent high-low range, while silver is showing greater volatility in speculative trading.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, increased on Monday by about 3.43 metric tons, bringing the total to 1,079.66 metric tons, rebounding from 1,076.23 metric tons, which was the lowest level since January 15.

The euro declined in European trading on Monday against a basket of global currencies, posting its first loss in three days versus the US dollar, and pulling back from a two-week high, due to correction and profit-taking activity, in addition to attempts by the US currency to recover ahead of key US economic data releases.

Following the European Central Bank’s first monetary policy meeting of this year, expectations for a European rate cut in March have eased, despite the recent slowdown in inflationary pressures. To reprice those expectations, traders are awaiting further economic data from the euro area.

Price overview

• Euro exchange rate today: The euro fell against the US dollar by 0.15% to $1.1897, from today’s opening level at $1.1914, and recorded a session high at $1.1917.

• The euro ended Monday’s session up 0.85% against the dollar, marking its second consecutive daily gain, and recorded a two-week high at $1.1927, due to mounting negative pressure on the US currency.

The US dollar

The US Dollar Index rose by more than 0.1% on Tuesday, as part of recovery attempts from a two-week low, reflecting a rebound in the US currency against a basket of major and minor currencies.

Aside from buying from low levels, the dollar’s rebound comes ahead of the release of key US economic data on monthly retail sales, which will provide strong evidence about the pace of US economic growth in the first quarter of this year.

European interest rates

• The European Central Bank kept its main interest rates unchanged last week at 2.15%, the lowest level since October 2022, marking the fifth consecutive meeting without a change.

• ECB President Christine Lagarde said the bank is not committed to a pre-set path for rate cuts, noting that the March decision will depend entirely on incoming data in the coming weeks.

• Lagarde confirmed that the ECB is closely monitoring the euro exchange rate, considering that the current strength of the single currency helps curb imported inflation and may speed progress toward targets without the need for further tightening.

• After the meeting, money market pricing for a 25 basis point ECB rate cut in March declined from 50% to 30%.

• To further reprice these expectations, investors are waiting for more euro area data on inflation, unemployment, and wages.

The Australian dollar declined in Asian trading on Tuesday against a basket of major and minor currencies, pulling back from its highest level in three years versus the US dollar, due to correction and profit-taking activity, in addition to attempts by the US currency to recover ahead of key US economic data releases.

Following the latest meeting of the Reserve Bank of Australia, expectations have increased that the bank could raise Australian interest rates in May. To reprice those expectations, traders are awaiting further economic data from Australia.

Price overview

• Australian dollar exchange rate today: The Australian dollar fell against the US dollar by 0.3% to 0.7072, from today’s opening level at 0.7094, and recorded a session high at 0.7095.

• The Australian dollar ended Monday’s session up 1.15% against the US dollar, marking its second consecutive daily gain, and recorded a three-year high at 70.99 cents, amid renewed selling pressure on the US currency.

The US dollar

The US Dollar Index rose by more than 0.1% on Tuesday, as part of a recovery attempt from a two-week low, reflecting a rebound in the US currency against a basket of major and minor currencies.

Aside from buying from low levels, the dollar’s rebound comes ahead of the release of key US economic data on monthly retail sales, which will provide strong evidence about the pace of US economic growth in the first quarter of this year.

Australian interest rates

• Earlier this month, the Reserve Bank of Australia’s monetary policy committee decided to raise the benchmark interest rate by 25 basis points to 3.85%, marking the first Australian rate hike since November 2023, after keeping rates unchanged over the previous three meetings.

• RBA Governor Michele Bullock said that inflation remains too high and cannot be allowed to get out of control, adding that there are concerns inflation could remain elevated.

• After the February meeting, pricing for a 25 basis point rate hike in March remained below 50%.

• Pricing for a 25 basis point rate hike in May rose to above 80%.

• To further reprice these expectations, investors are waiting for additional data on inflation, unemployment, and wages in Australia.

US stock indices mostly rose during Monday trading, extending their strong gains with support from the technology sector, while the Dow Jones index held above the 50,000-point level, which it closed above for the first time in its history last Friday.

In the current week, the US January jobs report is due for release after being postponed from last Friday, in addition to upcoming consumer price data.

Traders are also maintaining bets that the Federal Reserve will move toward monetary easing later this year.

According to the CME Group FedWatch tool, the probability of a 25-basis-point rate cut at the Federal Reserve’s next meeting on March 18 stands at 15.8%, down from 18.4% on Friday.

In trading, the Dow Jones Industrial Average slipped by less than 0.1% (about 17 points) to 50,098 as of 17:33 GMT. The S&P 500 index rose 0.6% (about 40 points) to 6,972, while the Nasdaq Composite climbed 1.1% (about 245 points) to 23,276.