Gold prices rose in the European market on Tuesday, extending gains for the third consecutive day and continuing to break record highs, approaching the $3,700 per ounce barrier for the first time in history, supported by the current decline in US dollar levels.

A series of weak data on the US labor market has increased expectations that the Federal Reserve will deliver deeper interest rate cuts. To reprice those expectations, investors are awaiting the release of key US inflation data this week.

Price Overview

• Gold prices today: Gold rose by 0.65% to ($3,659.41), the highest level ever, from the opening price of ($3,636.47), recording the lowest level at ($3,628.44).

• At Monday’s settlement, gold prices rose by 1.4%, marking the second consecutive daily gain, after surpassing the $3,600 per ounce barrier for the first time in history.

US Dollar

The dollar index fell on Tuesday by about 0.1%, deepening losses for the third consecutive session, recording the lowest level in seven weeks at 97.26 points, reflecting the continued decline of the US currency against a basket of major and minor counterparts.

This decline comes amid ongoing selling of the US dollar, especially after recent US data showed further deterioration in the labor market, reinforcing expectations that the Federal Reserve will deliver deeper interest rate cuts.

US Interest Rates

• According to the CME FedWatch tool, the probability of a 25-basis-point US interest rate cut at the September meeting is currently priced at 100%, with a 12% chance of a 50-basis-point cut.

• The probability of a 25-basis-point cut at the October meeting is also currently priced at 100%, with a 10% chance of a 50-basis-point cut.

• To reaffirm the above pricing, investors are awaiting the release of key US inflation data for August this week, ahead of next week’s Federal Reserve meeting.

Gold Performance Outlook

• Han Tan, Chief Market Analyst at Nymo Money, said: Market optimists have drawn momentum from conviction about interest rate cuts, which pushed gold to new record highs.

• Tan added: The weakness of the dollar has also paved the way for trading above $3,600, while bullion-backed flows and central bank purchases reinforce a strong mix of supportive factors.

• Tan explained: We may see spot gold approach $3,700 this week if markets witness sharply downward revisions to US jobs data and shockingly low CPI data.

• Tan said: Gold markets are likely to reserve their biggest reaction for prices until the latest policy signals emerge from next week’s Federal Open Market Committee meeting.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell on Monday by about 2.29 metric tons, bringing the total down to 979.68 metric tons, the lowest since August 29.

The euro rose in the European market on Tuesday against a basket of global currencies, extending gains for the third consecutive day against the US dollar, recording the highest level in seven weeks, as selling of the US currency continues in the foreign exchange market, overshadowing concerns about political stability in France, the second-largest economy in the eurozone.

Tomorrow, Wednesday, the European Central Bank begins its important monetary policy meeting, where interest rates are expected to remain unchanged for the second meeting in a row. Markets await further signals on the possibility of resuming the monetary easing cycle during the remainder of this year.

Price Overview

• Exchange rate of the euro today: The euro rose against the US dollar by 0.15% to (1.1778$), the highest since July 24, from today’s opening price at (1.1763$), recording the lowest level at (1.1758$).

• The euro ended Monday’s trading up by 0.4% against the dollar, marking its second daily gain in a row, after weak US employment data boosted expectations of a US interest rate cut.

US Dollar

The dollar index fell on Tuesday by more than 0.1%, deepening losses for the third consecutive session, recording the lowest level in seven weeks at 97.32 points, reflecting the continued decline of the US currency against a basket of major and minor counterparts.

This decline comes amid ongoing selling of the US dollar, especially after recent US data showed further deterioration in the labor market, reinforcing expectations that the Federal Reserve will deliver deeper interest rate cuts.

According to the CME FedWatch tool, traders are pricing in an 89% chance of a 25-basis-point rate cut at the Federal Reserve’s September meeting, and an 11% chance of a larger 50-basis-point cut.

Fall of François Bayrou

French Prime Minister François Bayrou fell after losing a crucial confidence vote in parliament, with 364 lawmakers voting against the government compared to 194 in favor. This political collapse dealt a major blow to the authority of President Emmanuel Macron.

Recently, internal discontent escalated over Bayrou’s proposed austerity plans, which included cutting public budgets and canceling two public holidays in an attempt to address the country’s heavy debt, amounting to about 114% of GDP.

In light of this, President Macron is expected to appoint a new prime minister in the coming days, but he will face a serious challenge in securing stable parliamentary support, according to reports and analyses pointing to fears of prolonged legislative paralysis.

European Central Bank

• The European Central Bank meets on Wednesday and Thursday to study the appropriate monetary policy for the latest economic developments in the euro area.

• The bank is widely expected to keep European interest rates unchanged at the 2.15% range, the lowest level since October 2022, for the second meeting in a row.

• Markets are awaiting further evidence on the timing of the European Central Bank’s resumption of monetary easing and interest rate cuts before the end of this year.

The Australian dollar rose in the Asian market on Tuesday against a basket of global currencies, extending gains for the third day in a row against its US counterpart, recording the highest level in seven weeks, supported by the continued selling of the US currency in the foreign exchange market.

The rise of the Australian dollar is also supported by renewed inflationary pressures on policymakers at the Reserve Bank of Australia, which has led to a decline in the likelihood of an Australian interest rate cut in September.

Price Overview

• Exchange rate of the Australian dollar today: The Australian dollar rose against its US counterpart by about 0.2% to (0.6605), the highest since July 24, from today’s opening price at (0.6593), recording the lowest level at (0.6589).

• On Monday, the Australian dollar gained 0.55% against the US dollar, its second daily rise in a row, after weak US employment data boosted expectations of a US interest rate cut.

US Dollar

The dollar index fell on Tuesday by more than 0.1%, deepening losses for the third consecutive session, recording the lowest level in one and a half months at 97.32 points, reflecting the continued decline of the US currency against a basket of major and minor counterparts.

This decline comes amid ongoing selling of the US dollar, especially after recent US data showed further deterioration in the labor market, reinforcing expectations that the Federal Reserve will deliver deeper interest rate cuts.

According to the CME FedWatch tool, traders are pricing in an 89% chance of a 25-basis-point rate cut at the Federal Reserve’s September meeting, and an 11% chance of a larger 50-basis-point cut.

Australian Interest Rates

• Recent data from Sydney showed inflation in the country rising to its highest level in a year, which renewed inflationary pressures on policymakers at the Reserve Bank of Australia.

• Following the above inflation data, the pricing of a 25-basis-point interest rate cut by the Reserve Bank of Australia in September fell from 30% to 22%.

• To reprice those odds, investors are awaiting more data on inflation, unemployment, and wages in Australia before the upcoming September 30 meeting.

The U.S. dollar declined against most major currencies during Monday’s trading, with pressure mounting on the greenback as markets remain firmly priced for a Federal Reserve rate cut at its upcoming meeting this month.

This comes ahead of key U.S. inflation data due later this week, which the Fed is expected to weigh before initiating its easing cycle.

Data released Friday by the U.S. Department of Labor showed that the economy added only 22,000 jobs in August, compared to expectations of 75,000, marking a highly disappointing report.

The figures also revealed that the U.S. unemployment rate rose to 4.3% in August, in line with analysts’ forecasts.

Following these numbers, bets on a Fed rate cut at this month’s meeting increased, with the CME FedWatch tool showing a 98% probability of a 25-basis-point reduction.

By 20:07 GMT, the U.S. dollar index fell 0.3% to 97.4, after touching a high of 97.9 and a low of 97.4.

Australian Dollar

The Australian dollar rose 0.6% against its U.S. counterpart to 0.6594 by 20:24 GMT.

Canadian Dollar

The Canadian dollar also gained 0.1% against the U.S. dollar to 0.7241 by 20:24 GMT.