Gold prices declined in the European market on Wednesday for the first time in the last four sessions, retreating from record highs, as correction and profit-taking activity intensified, in addition to pressure from the strong rise of the US dollar in the foreign exchange market.

This comes after cautious remarks from Federal Reserve Chair Jerome Powell regarding further monetary easing in the United States, which increased doubts about two additional rate cuts during the remainder of this year.

Price Overview

• Gold prices today: Gold fell by about 0.4% to $3,750.82, from the opening level at $3,764.29, with a session high at $3,772.33.

• At Tuesday’s settlement, gold gained 0.5%, marking a third consecutive daily rise and a new record high at $3,791.13 per ounce.

US Dollar

The dollar index rose on Wednesday by 0.4%, on track for its first gain in the last three sessions, reflecting a strong rebound in the US currency against a basket of major and minor counterparts.

This recovery comes amid growing doubts over two additional rate cuts before year-end, especially after Powell adopted a cautious tone on further monetary easing.

US Interest Rates

• Powell said on Tuesday that the central bank will continue to balance concerns surrounding labor market weakness and growing inflation risks.

• According to CME Group’s FedWatch tool: the probability of a 25-basis-point rate cut at the October meeting is currently priced at 92%, while the probability of no change stands at 8%.

• To reprice these probabilities, investors are closely monitoring upcoming US economic data and comments from Federal Reserve officials.

Gold Outlook

• Ole Hansen, Head of Commodity Strategy at Saxo Bank, said: “The recent gold rally is fueled by falling US funding costs, alongside a mix of investor concerns, including overvalued equities, Fed independence, and rising geopolitical risks.”

• Ricardo Evangelista, Senior Analyst at ActivTrades, said: “With geopolitical turmoil and economic uncertainty driving safe-haven demand, and expectations of a looser monetary stance by the Fed growing, gold is expected to hold above $3,750 in the short term, with potential for a new resistance level at $3,900.”

SPDR Fund

Gold holdings with the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged on Tuesday at 1,000.57 metric tons, the highest since August 3, 2022.

The euro declined in European trading on Wednesday against a basket of global currencies, heading for its first loss in three sessions versus the US dollar, as the greenback rebounded following cautious comments from Federal Reserve Chair Jerome Powell.

After the European Central Bank’s most recent meeting, which included more hawkish remarks than markets had anticipated, the likelihood of a eurozone rate cut before the end of the year has diminished. To confirm those expectations, investors are awaiting further evidence on the course of monetary easing in the euro area.

Price Overview

• EUR/USD today: The euro fell about 0.2% to $1.1795, down from an opening of $1.1815, after reaching a high of $1.1819.

• On Tuesday, the euro gained 0.1% against the dollar, its second consecutive daily advance, supported by weaker industrial and business activity in the United States during September.

US Dollar

The dollar index rose about 0.2% on Wednesday, on track for its first gain in three sessions, reflecting a rebound in US currency levels against both major and minor peers.

This recovery comes amid mounting doubts about the two additional rate cuts expected before year-end, particularly after Powell adopted a cautious tone on further monetary easing.

Powell stated that the Fed must continue balancing the competing risks of elevated inflation and a weakening labor market when setting policy, reiterating last week’s remarks. He described the policy dilemma as being in a “difficult” position.

James Neifton, senior corporate FX dealer at Convera, commented: “Powell’s remarks reinforced the Fed’s cautious approach.” He added: “Powell acknowledged the absence of risk-free policy options, warning that premature easing could entrench inflation, while excessive tightening could needlessly harm employment prospects.”

European Interest Rates

• Sources indicate that ECB policymakers see no need for further rate cuts to reach the 2% inflation target, despite updated forecasts pointing to lower rates over the next two years.

• Sources also noted that unless the eurozone suffers another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Money market pricing for a 25-basis-point ECB cut in October is currently steady at around 10%.

• Traders have scaled back bets on ECB easing, pointing instead to the end of this year’s rate-cut cycle.

• To reassess these probabilities, investors will closely monitor incoming European economic data and remarks from ECB officials in the coming period.

The Australian dollar strengthened broadly in Asian trading on Wednesday against a basket of global currencies, hitting its highest level in about a week versus the US dollar, following the release of hot inflation data from Australia.

The data showed renewed inflationary pressures on policymakers at the Reserve Bank of Australia, which lowered the likelihood of an interest rate cut at next week’s meeting.

Price Overview

• AUD/USD today: The Australian dollar rose 0.4% to 0.6623, the highest in about a week, up from the session’s opening at 0.6597, after touching a low of 0.6589.

• The Australian dollar ended Tuesday flat against the US dollar, after gaining 0.1% the previous day in a recovery move from a two-week low at 0.6575.

Australian Inflation

The Australian Bureau of Statistics reported Wednesday that the overall Consumer Price Index rose by 3.0% year-on-year in August, the fastest pace since July 2024, above market forecasts of 2.9%, compared to 2.8% in July.

The figures confirm that inflation has accelerated back out of the RBA’s 2%–3% medium-term target band, reducing the likelihood of an additional rate cut this year.

Views and Analysis

• Tony Sycamore, IG Markets: “Today’s inflation update suggests the RBA will maintain a cautious approach to its easing cycle. September is off the table, but November remains in play.”

• Russel Chesler, VanEck: “The recent uptick in inflation, combined with continued labor market strength, reinforces our view that another rate cut is unlikely before November.”

Australian Interest Rates

• Following the inflation data, market pricing for a 25 basis-point rate cut by the RBA in September dropped from 25% to just 5%.

• RBA Governor Michele Bullock said Monday that the Australian economy is in good shape, with inflation expected to return to the middle of the 2%–3% target range and the labor market close to full employment.

The Australian Bureau of Statistics reported on Wednesday that the annual Consumer Price Index rose by 3.0% in August, the fastest pace since July 2024. This exceeded both market expectations of a 2.9% increase and the prior reading of 2.8%.

The data highlights accelerating inflationary pressures on policymakers at the Reserve Bank of Australia, reducing the likelihood of an interest rate cut next week.

•This release is considered positive for the Australian dollar.