Gold prices rose in the European market on Wednesday, extending gains for a second consecutive session, supported by a pause in the US dollar’s advance against a basket of major currencies and by a modest uptick in safe-haven buying of the metal.

However, the current rise remains limited as investors stay cautious ahead of the final Federal Reserve policy decision of the year. The central bank is widely expected to announce a third consecutive 25-basis-point rate cut, along with key updates on the projected path of interest rates through 2026.

Price Overview

• Gold prices today: Gold rose 0.3% to $4218.85 from an opening level of $4207.68, after hitting a low of $4201.12.

• At Tuesday’s settlement, gold gained 0.45% — its first increase in three sessions — with safe-haven inflows providing modest support.

US Dollar

The dollar index fell 0.2% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s recent upward momentum.

Federal Reserve

The Federal Reserve concludes its final policy meeting of 2025 later today, with expectations pointing to a 25-basis-point cut in the federal funds rate — the third consecutive reduction this year.

The interest-rate decision, monetary-policy statement, and updated economic projections will be released at 19:00 GMT, followed by Chair Jerome Powell’s press conference at 19:30 GMT.

These updates are expected to offer stronger clarity on the direction of monetary policy and the likelihood of further rate cuts in 2026.

Kevin Hassett — the White House’s senior economic adviser and the leading candidate to succeed Powell — said Tuesday that there is “plenty of room” for deeper rate cuts, although persistently high inflation may alter the calculus.

Gold Outlook

• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said investors are significantly repositioning ahead of the Fed’s policy decision.

• At FX News Today, our view is as follows: If the Fed’s updates and messaging turn out more aggressive than markets currently expect, the probability of additional rate cuts in 2026 may decline, placing stronger downward pressure on gold.

SPDR Fund

Holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — fell by 1.14 metric tons on Tuesday, marking a third consecutive daily decline. Total holdings now stand at 1,047.97 metric tons, the lowest since December 3.

The euro edged higher in European trading on Wednesday against a basket of global currencies, marking its first positive move against the US dollar in five sessions. The advance came as the dollar’s recent upward momentum paused ahead of the Federal Reserve’s policy decision due later today.

With market expectations for a European rate cut in December fading, investors are also awaiting comments from European Central Bank President Christine Lagarde, who will participate in a panel discussion on the future of the euro and the dollar as global reserve currencies at the Financial Times Global Conference.

Investors hope Lagarde will offer clearer signals on the ECB’s policy outlook for 2026, especially as several eurozone economic indicators have shown notable improvement in recent weeks.

Price Overview

• Euro exchange rate today: the euro rose by less than 0.1% to $1.1629, from the opening level of $1.1625, and recorded a low of $1.1622.

• The euro ended Tuesday’s session down 0.1% against the dollar, marking a fourth consecutive daily loss, after strong US job-openings data.

US Dollar

The dollar index fell about 0.1% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s recent rise against global peers.

Attention turns to the Federal Reserve’s decision later today, with markets nearly fully pricing in a 25-basis-point rate cut — the third consecutive cut this year.

Investors will scrutinize the Fed statement and policymakers’ projections for indications on the 2026 policy path, particularly amid easing inflation pressures and persistent concerns over economic growth.

European Interest Rates

• Money-market pricing for a 25-basis-point ECB rate cut in December remains below 10%.

• Reuters reported that ECB officials lean toward keeping interest rates unchanged at the December meeting.

Christine Lagarde

At 10:55 GMT, ECB President Christine Lagarde is scheduled to speak at the Financial Times Global Conference.

Euro Outlook

At Economies.com, we expect that if Lagarde delivers more hawkish remarks, market expectations for ECB rate cuts in the first half of next year will decline, providing additional support for the euro against the US dollar.

Japan’s yen rose in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover from a two-week low against the US dollar. The move was supported by a pause in the dollar’s advance ahead of the Federal Reserve’s policy decision due later today.

The Bank of Japan meets next week, and markets widely expect a 25-basis-point interest-rate hike. Investors are watching Governor Kazuo Ueda closely for clear signals on the policy path for 2026.

Price Overview

• Yen exchange rate today: the US dollar fell by about 0.2% against the yen to ¥156.56, from the opening level of ¥156.81, and recorded a high of ¥156.94.

• The yen ended Tuesday’s session down about 0.6% against the dollar, marking a third consecutive daily loss. It hit a two-week low at ¥156.96 after strong US job-openings data.

US Dollar

The dollar index fell about 0.1% on Wednesday, retreating from a one-week high and heading toward its first loss in three sessions, reflecting a pause in the US currency’s advance against a basket of global currencies.

All eyes are on the Federal Reserve’s decision later today, with markets pricing in a nearly certain 25-basis-point cut — the third consecutive rate cut this year.

Investors will scrutinize the Fed statement and policymakers’ projections for clues on the 2026 policy path, especially amid easing inflation pressures and persistent growth concerns.

Japan’s Interest Rates

• Following recent inflation and wage data, markets now price an over-80% probability that the Bank of Japan will raise rates by 25 basis points at its December meeting.

• Governor Kazuo Ueda last week offered a more optimistic outlook for Japan’s economy and said the Bank would examine the pros and cons of raising rates at the upcoming policy meeting.

• Three government officials told Reuters the Bank of Japan is likely to raise interest rates this December.

Bank of Japan

The Bank of Japan meets next week amid firm expectations of a 25-basis-point hike, which would lift the policy rate to around 0.75% — the highest level since 2008, before the global financial crisis.

Markets will watch Governor Ueda’s remarks closely for guidance on the 2026 trajectory, especially as expectations grow that the Japanese government may resort to more fiscal stimulus, complicating the policy landscape for the central bank.

Only a few weeks ago, the US stock market stumbled on fears of a potential bubble in AI-related shares. Now, equities are once again approaching record highs — and much of that momentum is being driven by the Federal Reserve.

Stocks rebounded from their early-November pullback as investors increasingly bet that the Fed will cut interest rates this week in its final meeting of the year.

Rate cuts can support equities by reducing borrowing costs for consumers and businesses, lowering returns on savings, and encouraging spending and investment. That, in turn, boosts economic activity and corporate earnings.

Lower interest rates also reduce yields on short-term government bonds and cash-like instruments such as money-market funds, making higher-returning assets — like equities — more attractive.

In general, interest-rate cuts can create a strong tailwind for the stock market.

Jonathan Krinsky, chief market technician at BTIG, wrote in a Monday note that the market’s recent rally has coincided with rising expectations of a December rate cut.

Traders on Monday were pricing in an 89% chance of a cut, according to CME’s FedWatch tool.

Krinsky added: “Markets have essentially erased the weakness seen in November… and that reversal has almost exactly tracked the increase in December rate-cut odds.”

Lower rates can provide meaningful support for stocks

The Fed is considering a rate cut in response to concerns about a weakening labor market. But for investors, lower rates act as fuel for further stock-market gains.

The Fed’s benchmark rate influences a wide array of borrowing costs across the economy. A cut would reduce financing expenses for many companies.

The Russell 2000 index — which tracks smaller, more rate-sensitive firms — hit a record high on December 4.

José Torres, senior economist at Interactive Brokers, said: “If you look at smaller, more vulnerable companies like those in the Russell 2000, lower rates significantly reduce their financing burden, expanding their profit margins. That’s why sectors like real estate, manufacturing, and small business benefit the most from lower rates.”

That said, even as investors welcome the near-term cuts expected this week, Wall Street is always looking ahead — and uncertainty remains over the pace of future easing in January.

On Wednesday, the Fed will release its quarterly Summary of Economic Projections, which includes policymakers’ anonymous forecasts for the interest-rate path over the coming months.

Jason Pride, chief of investment strategy and research at Glenmede, wrote: “While the Fed may consider further cuts this week and into 2026, any renewed acceleration in inflation will likely force a slower and more cautious path.”