Gold prices fell in European trading on Thursday, extending losses for a third consecutive session and nearing a two-week low, with the metal at risk of losing its foothold above the $4,000 per-ounce mark due to the continued strength of the US dollar in foreign-exchange markets.

Investors are awaiting key US inflation data, scheduled for release later this week, for further clues about the path of interest rates.

Price Overview

• Today’s gold price: Spot gold fell 0.8% to $4,066.24, down from an opening level of $4,098.19, after reaching an intraday high of $4,129.66.

• On Wednesday, gold lost 0.65% for a second straight daily decline, touching a two-week low at $4,004.56 per ounce.

• The metal has entered a sharp correction phase after Tuesday’s plunge, which marked its biggest one-day drop in five years, as heavy profit-taking followed record highs near $4,381.73 per ounce.

US Dollar

The US dollar index rose more than 0.2% on Thursday, resuming gains after a brief pause the previous session, reflecting continued strength of the greenback against major and minor currencies.

A stronger dollar makes gold, which is priced in US dollars, less attractive to buyers holding other currencies. The dollar’s rise comes as investors continue to view it as the most appealing asset at the moment, particularly amid growing expectations that major central banks in the UK, Japan, Canada, and Australia will shift toward more accommodative policies to support their slowing economies.

US Interest Rates

• According to CME’s FedWatch tool, markets are currently pricing in a 97% probability of a 25-basis-point rate cut at the Federal Reserve’s October meeting, with just a 3% chance of no change.

• To reassess these probabilities, investors are closely watching the release of US consumer inflation data for September, expected Friday, though publication could be delayed to next week.

Outlook for Gold

Brian Lan, managing director at Singapore-based Gold Silver Central, said: “We’ve seen a natural correction after the recent rally in gold prices, and there is still some downward pressure. We expect prices to consolidate before continuing their upward trend.”

Lan added: “At this stage, we remain optimistic about gold in the long term, but short-term investors should be cautious given the elevated volatility.”

SPDR Gold Trust Holdings

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 6.29 metric tons on Wednesday to 1,052.37 metric tons, down from 1,058.66 metric tons — the highest level since June 24, 2022.

The euro fell in European trading on Thursday against a basket of global currencies, resuming losses that had paused temporarily on Wednesday against the US dollar, and moving close to a two-week low amid renewed trade tensions between the United States and China — tensions expected to weigh on global trade and economic growth.

With inflationary pressures resurfacing for European Central Bank policymakers, expectations for further rate cuts in the euro area this year have diminished. Investors now await additional economic data and remarks from ECB officials to reassess those probabilities.

Price Overview

• Today’s euro rate: The euro declined 0.2% against the dollar to $1.1591, down from an opening level of $1.1610, after reaching an intraday high of $1.1614.

• On Wednesday, the euro gained about 0.1% versus the dollar — its first increase in four sessions — after earlier hitting a two-week low of $1.1577.

US Dollar

The US dollar index rose more than 0.2% on Thursday, resuming its advance after a brief pause in the previous session, reflecting continued strength of the American currency against major and minor peers.

The dollar’s gains came as investors focused on it as the most attractive asset in the current market environment, particularly amid growing expectations that major central banks in the UK, Japan, Canada, and Australia will adopt more accommodative monetary policies to support their slowing economies.

Trade Tensions

Reuters reported Wednesday that the Trump administration is considering imposing restrictions on a broad range of software-based exports to China — from laptop computers to aircraft engines — in response to Beijing’s latest round of curbs on rare-earth metal exports.

Kyle Rodda, senior financial-markets analyst at Capital.com, said: “Trade tensions remain the main driver of market volatility, but it’s fair to say that most participants expect these threats not to fully materialize. They are seen more as brinkmanship and a tactic to push negotiations forward.”

European Interest Rates

• Money-market pricing currently assigns less than a 10% probability that the European Central Bank will cut rates by 25 basis points in October.

• Traders have scaled back bets on additional monetary easing, suggesting that this year’s ECB rate-cutting cycle has effectively ended.

• To reassess these expectations, investors are watching for upcoming European economic data and further commentary from ECB officials.

The Japanese yen fell in Asian trading on Thursday against a basket of major and minor currencies, extending losses for the fifth consecutive session against the US dollar and hitting its lowest level in nearly two weeks, pressured by Prime Minister Sanae Takaichi’s stimulus plans.

Japan’s new prime minister is preparing to announce a massive stimulus package aimed at supporting the world’s fourth-largest economy — a move that is likely to increase pressure on Bank of Japan policymakers and delay any near-term steps toward monetary policy normalization or interest rate hikes.

Price Overview

• Today’s yen rate: The US dollar rose 0.4% against the yen to ¥152.57 — its highest since October 14 — after opening at ¥151.97 and hitting a low of ¥151.82.

• On Wednesday, the yen ended slightly lower (down less than 0.1%) against the dollar, marking a fourth straight daily loss as investors continued assessing Takaichi’s potential economic policies.

New Stimulus Package

Government sources told Reuters that Prime Minister Sanae Takaichi is drafting an economic stimulus package likely to exceed 13.9 trillion yen ($92 billion) to help households cope with rising prices and inflation.

The sources added that the final size of the package is still being determined, with an official announcement expected early next month.

Japanese Interest Rates

• Takaichi, a supporter of flexible fiscal and monetary policies, said Tuesday that the details of monetary policy are up to the Bank of Japan.

• Economists generally believe the new prime minister will not obstruct the BOJ’s eventual rate hike, but most still expect the next increase to come no sooner than December.

• Finance Minister Satsuki Katayama said Wednesday that close coordination between the government and the Bank of Japan is essential to ensure the effectiveness of economic and monetary measures.

• The Bank of Japan is scheduled to announce its next monetary policy decision on October 30. Futures markets are pricing in roughly a 20% chance of a 25-basis-point rate hike to 0.75%.

The Canadian dollar rose on Wednesday, extending its gains after data released yesterday showed inflation came in higher than expected.

Canada’s annual inflation rate accelerated to 2.4% in September, driven mainly by a smaller year-on-year decline in gasoline prices compared with the previous month, as well as higher food prices.

This report marks the final major economic release before the upcoming Bank of Canada meeting later this month. Analysts and investors widely expect the central bank to cut interest rates for a second consecutive time.

Economists surveyed by Reuters had forecast annual inflation to rise to 2.3% in September after recording 1.9% in August.

Statistics Canada (StatsCan) reported that the Consumer Price Index (CPI) rose 0.1% month-on-month in September, following a similar 0.1% decline in August.

As of 21:03 GMT, the Canadian dollar strengthened 0.3% against the US dollar to 0.7141.

Australian Dollar

The Australian dollar also edged higher, up 0.1% to 0.6491 against the US dollar at 21:03 GMT.

US Dollar

The US dollar index was steady at 98.9 points as of 20:54 GMT, having touched a high of 99.1 and a low of 98.7.

Netflix shares fell sharply after the company reported weaker-than-expected revenue and earnings for the third quarter, while investors awaited Tesla’s results due after the market close.

Traders are looking for key signals from upcoming US inflation data later this week to gauge the Federal Reserve’s policy path, with expectations strongly leaning toward a rate cut at next week’s meeting.

Meanwhile, the US government shutdown has entered its 22nd day, though optimism is growing that it could end later this week.

Kevin Hassett, Director of the National Economic Council, told CNBC in an interview that the shutdown is likely to end within the week.

Analysts at Citigroup said expectations for an imminent resolution to the US government shutdown — along with progress toward a trade deal between Washington and Beijing — could help stabilize gold prices in the coming weeks.