Gold prices rose in European trading on Friday, climbing back above the $4,000-per-ounce mark as the US dollar weakened against a basket of major currencies.

Recent US economic data revealed further signs of softness in the labor market, strengthening expectations that the Federal Reserve could move to cut interest rates in December.

Price Overview

• Gold prices today: Spot gold rose 0.9% to $4,011.60 per ounce, up from the session’s opening level of $3,977.19, after touching an intraday low of $3,971.58.

• On Thursday, gold prices recorded a slight decline as safe-haven demand weakened.

US Dollar

The US Dollar Index traded near its lowest levels of the week, reflecting continued weakness in the greenback against major and minor currencies, which in turn supports dollar-denominated commodities such as gold.

The dollar’s underperformance has been linked to the longest government shutdown in US history, heightening uncertainty over the economic outlook. The deadlock in Congress has forced both investors and the Federal Reserve to rely on private-sector indicators for guidance.

US Labor Market

With the release of the official nonfarm payrolls report delayed due to the government shutdown, traders have turned to private data showing that the US economy lost jobs in October across the government and retail sectors.

Cost-cutting measures and increased corporate reliance on artificial intelligence technologies have also driven a significant rise in announced layoffs.

Westpac Bank noted in a research report that “the Challenger job cuts data show a sharp increase in layoffs in the United States, suggesting that the labor market may be slowing.”

Interest Rate Outlook

• According to CME Group’s FedWatch tool, markets currently price in a 65% probability of a 25-basis-point rate cut in December, with a 35% chance of rates remaining unchanged.

• To reassess these expectations, investors are closely monitoring remarks from Federal Reserve officials amid the ongoing suspension of government economic data releases.

Gold Outlook

ANZ commodity strategist Soni Kumari said, “Private-sector employment data continues to point toward a potential rate cut in December, which is providing some support for gold prices.”

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 1.72 metric tons on Thursday to a total of 1,040.35 metric tons.

The British pound fell in European trading on Friday against a basket of major currencies, resuming losses after a two-day rebound from a seven-month low against the US dollar. The decline came as investors grew increasingly concerned about the upcoming UK budget, expected to be announced soon.

UK Chancellor of the Exchequer Rachel Reeves signaled this week that broad-based tax increases are on the way to avoid a return to “austerity,” describing them as “difficult choices” aimed at protecting public spending and reducing Britain’s debt burden.

As expected, the Bank of England on Thursday left interest rates unchanged for a second consecutive meeting, amid a clear split among policymakers over the pace of monetary easing.

Price Overview

• GBP/USD rate today: The pound fell 0.2% to $1.3116, down from the session’s opening level of $1.3139, after reaching an intraday high of $1.3142.

• On Thursday, the pound gained about 0.7% against the dollar, marking its second straight daily advance as it continued to recover from a seven-month low of $1.3010 following the Bank of England’s policy decision.

UK Budget

According to The Times on Thursday, Chancellor Rachel Reeves told the UK’s budget watchdog that higher personal taxes are among the “key measures” she is preparing to include in her upcoming budget.

Reeves had already paved the way on Tuesday for broad-based tax hikes to avoid a return to austerity, describing her second annual budget as one that involves “difficult choices” to safeguard public spending and bring down national debt.

Markets are now eagerly awaiting details on the widely anticipated tax increases when Reeves presents her budget on November 26.

Bank of England Decision

In line with expectations, the Bank of England voted on Thursday to keep interest rates unchanged at 4.00%, their lowest level since February 2023, marking a second consecutive hold.

The vote split 5–4, with five members supporting the hold and four favoring a 25-basis-point cut to 3.75%. This narrow division contrasted with market forecasts that had expected a 6–3 vote in favor of maintaining rates.

The Bank said inflation “has likely peaked” and is expected to decline notably in the October and November data.

Andrew Bailey

Although Governor Andrew Bailey supported holding rates steady, he was the only member among the majority who acknowledged that inflationary risks had begun to ease. He also emphasized the need for “further evidence” before taking any step toward rate cuts.

Analysis and Commentary

• George Brown, senior economist at Schroders, said the Bank of England’s decision to keep rates unchanged was “the right call,” noting that inflation remains roughly double the 2% target.

• Brown added that the central bank will be in a stronger position after the budget uncertainty clears, supported by additional labor and inflation data, to decide whether further monetary easing in December is warranted.

The Japanese yen weakened in Asian trading on Friday against a basket of major and minor currencies, paring some of its gains from the previous day against the US dollar after the release of gloomy economic data showing an unexpected slowdown in household spending.

Despite today’s decline, the yen remains on track to post a weekly gain, supported by buying from eight-month lows and renewed expectations that the Bank of Japan may raise interest rates in December.

Price Overview

• USD/JPY rate today: The US dollar rose 0.2% to ¥153.31, up from the session’s opening at ¥153.06, after touching a low of ¥152.81.

• The yen ended Thursday’s session up 0.7% against the dollar, its second gain in the past three sessions, recovering from an eight-month low of ¥154.48.

• In addition to bargain buying, the yen strengthened Thursday following upbeat wage data for September.

Weak Data

Friday’s figures from Tokyo showed that Japanese household spending rose 1.8% year-on-year in September, missing market expectations for a 2.5% increase, after a 2.3% rise in August.

The slowdown in consumer spending could pave the way for weaker prices and a moderation in inflation over the coming period. Easing inflationary pressure on policymakers at the Bank of Japan reduces the likelihood of further rate hikes in the near term.

Weekly Performance

So far this week, the yen is up about 0.5% against the US dollar, on track to record its first weekly gain in three weeks.

Interest Rate Outlook

• Although Bank of Japan Governor Kazuo Ueda sent his strongest signal yet last week about a possible rate hike in December, markets remain unconvinced by the central bank’s cautious approach.

• Market pricing currently reflects roughly a 55% probability of a 25-basis-point rate hike at the December meeting.

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

Most cryptocurrencies declined on Thursday as risk appetite weakened across markets amid renewed concerns over the US labor market.

Data released by Challenger, Gray & Christmas showed that US job cuts surged by 183% month-over-month in October, raising fears about labor market stability. As a result, expectations for a Federal Reserve rate cut in December rose to 70%, up from 62% yesterday, according to the CME FedWatch tool.

Chicago Fed President Austan Goolsbee expressed caution on Thursday regarding the path forward for rate cuts, noting that the ongoing government shutdown has halted the release of core inflation data, making it difficult to accurately assess price trends.

Meanwhile, Cleveland Fed President Beth Hammack said she remains concerned that current monetary policy may not be properly calibrated to address ongoing inflationary pressures.

Ethereum

As of 20:37 GMT, Ethereum fell 4.4% to $3,309.7 on CoinMarketCap.