Gold prices fell in European trade on Monday away from a three-month high on profit-taking, as the US dollar rebounded against main rivals. 

The markets are now looking towards the Federal Reserve’s first policy meeting in 2025, expected to maintain interest rates unchanged but potentially provide clues on the future path of rates.

Prices

Gold prices fell 0.85% today to $2747 an ounce, with a session-high at $2772.

On Friday, gold rose 0.6% to a three-month high at $2786 as both the dollar and US yields tapered off. 

On October 31, 2024, gold prices hit a record high at $2790 before entering a correctional phase. 

Gold prices rose 2.5% last week, the fourth weekly profit in a row, and the largest since November on haven demand. 

The Dollar

The dollar index rose 0.3% on Monday away from a five-month lows at 107.22 against a basket of major rivals, in turn pressuring greenback-denominated metals and commodity futures. 

The Fed

The Federal Reserve is convening this week to decide on policies, expected widely to maintain rates unchanged. 

At the World Economic Forum in Davos, US President Donald Trump announced plans to pressure the Federal Reserve to cut rates, and called for other countries worldwide to take similar steps.

US Rates

Following Trump’s speech, the odds of a 0.25% Fed rate cut still stood at 1% in January, but rose to 36% in March.

SPDR

Gold holdings at the SPDR Gold Trust fell 4.01 tons on Friday, the fourth decline in a row to a total of 860.18 tons, the lowest since August 29, 2024.

The euro fell in European trade on Monday against a basket of major rivals, giving up a five-week high against the greenback on profit-taking, while investors shun new positions before ECB President Christine Lagarde’s remarks. 

The ECB is convening this week to discuss latest developments and potential policy tools, with full expectations of a 0.25% rate cut.

The Price

The EUR/USD fell 0.35% today to $1.0456, with a session-high at $1.0492.

On Friday, the pair rose 0.75%, the second profit in a row, marking a five-week high at $1.0521.

The pair rose 2.2% last week, the second weekly profit in a row, and the largest since July 2023 on hopes for more US interest rate cuts this year.

Lagarde

European Central Bank President Christine Lagarde is expected to provide clues on the development of the inflation fight in the eurozone, and the future of the eurozone interest rates. 

Lagarde said in Davos last week that the eurozone inflation is expected to hit the 2% target this year.

Lagarde said the decline gives the European Central Bank the space to ease monetary policies and boost struggling economies.

As for Trump’s tariff threats, Lagarde said the ECB won’t react to Trump’s statements until they’re acted upon.

Following the remarks, the odds of an ECB interest rate cut by 0.25% in January rose from 60% to 70%.

The Japanese yen fell in Asian trade on Monday against a basket of major rivals, moving away from a five-week high against the dollar on profit-taking, and after less bullish remarks from Bank of Japan governor Kazuo Ueda.

The BOJ raised interest rates last week to a 17-year peak as investors look for more clues on the path ahead for policy normalization in Japan.

The USD/JPY rose 0.25% to 156.08, with a session-low at 155.28.

The yen rose 0.1% on Friday against the dollar, expanding the gains after a short hiatus and approaching a five-week high at 154.77.

The yen rose 0.25% last week against the dollar, marking the second weekly profit in a row. 

BOJ

The Bank of Japan voted to raise interest rates by 25 basis points at the January 23-24 meeting to 0.5%, the highest since 2008, and the third such Japanese rate hike since policy normalization started last year. 

It was an 8-1 margin vote in favor of the hike, indicating increasing confidence by Japanese policymakers in the pace of growth for wages and prices.

The BOJ decided at the March 2024 meeting to exit negative rates, and raised short-term interest rates by 20 basis points then to 0.1%, the first such hike since 2007.

Policy Statement 

The BOJ said in its policy statements that the odds of achieving its targets are increasing, as many corporations vowed to continue raising wages in yearly negotiations this year.

The central bank believes that core inflation is heading towards the 2% medium term target, with financial markets stable overall. 

It noted that real interest rates remain very low, with the bank continuing to hike rates as its economic goals are carried out.

Economic Forecasts 

The BOJ expects main consumer prices to rise 2.7% in the financial year of 2024, up from 2.5% in previous forecasts.

It estimates 2025 main consumer prices to rise 2.4%, up from 1.9% in previous forecasts.

It estimates GDP growth at 0.5% in 2024, down from 0.6% in previous forecasts, and 1.1% in 2025. 

Oil prices rose on Friday but still marked weekly losses, after US President Donald Trump called for lower energy prices and higher American production.

Reuters reported that Chevron has completed a major oil field development in Kazakhstan at a cost of $48 billion, which would raise its production to 1% of total global supplies. 

Otherwise, the dollar index fell 0.6% as of 19:49 GMT to 107.4, with a session-high at 108.1, and a low at 107.2. 

On trading, Brent March futures rose 0.25%, or 21 cents to $78.5 a barrel, but still marked a 2.9% weekly loss.

US crude futures due in March were little changed at $74.66 a barrel, but still marked a weekly loss of 3.6%.