Gold prices rose in the European market on Tuesday, extending gains for the third consecutive session and continuing to break record highs, after surpassing the $3,900 mark for the first time in history, moving toward the key psychological level of $4,000 per ounce.

The rally comes amid strong demand for the precious metal as a safe-haven asset, driven by political developments in Japan and France, the ongoing US government shutdown, and growing expectations of additional interest rate cuts by the Federal Reserve.

Price Overview

• Gold prices today: Gold rose 0.4% to a new all-time high of $3,977.52 per ounce, up from an opening price of $3,960.94, after hitting an intraday low of $3,941.04.

• On Monday, gold settled 1.9% higher, marking its second straight daily gain, after breaking above the $3,900 level for the first time in history on the back of strong safe-haven demand.

Strong Demand

Demand for gold surged this week, fueled by dramatic political events in Japan and France, as investors sought refuge in the metal amid rising uncertainty in major global economies.

A senior White House official stated that President Donald Trump’s administration will begin mass layoffs of federal employees if negotiations with congressional Democrats to end the partial government shutdown “yield no result.”

US Interest Rates

• Federal Reserve member Stephen Miran reiterated his call for an aggressive rate-cut path, citing the impact of the Trump administration’s economic policies.

• Kansas City Fed President Jeff Schmid said he is reluctant to lower rates further, emphasizing that the central bank should focus on the risk of persistently high inflation rather than perceived labor market weakness.

• Following weak US labor market data last week, the CME Group’s FedWatch tool showed that the probability of a 25-basis-point rate cut in October rose from 90% to 99%, while the odds of keeping rates unchanged fell from 10% to 1%.

• To reassess these expectations, investors are closely monitoring the resumption of US economic data releases and further remarks from Fed officials.

Gold Outlook

• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Rate-cut probabilities for October and December remain above 80%, which supports gold prices, alongside the ongoing government shutdown, as no resolution has been reached in Congress yet.”

• Goldman Sachs raised its December 2026 gold price forecast to $4,900 per ounce from $4,300 on Monday, citing strong inflows from Western exchange-traded funds (ETFs) and continued central bank buying.

SPDR Fund

Holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — fell by 1.71 metric tons on Monday, marking the third consecutive daily decline, bringing total holdings down to 1,013.17 metric tons.

The euro fell in the European market on Tuesday against a basket of global currencies, extending its losses for the second consecutive session against the US dollar and nearing a two-week low recorded in the previous session, following stunning political developments in France, the eurozone’s second-largest economy.

French Prime Minister Sébastien Lecornu and his cabinet resigned on Monday, just hours after the announcement of his new government, marking the shortest-lived administration in modern French history and sparking fresh political uncertainty.

Price Overview

• Euro exchange rate today: The euro fell 0.25% against the dollar to $1.1677, down from the opening price of $1.1708, after recording a session high of $1.1715.

• On Monday, the euro closed 0.3% lower against the dollar, its third decline in four sessions, hitting a two-week low of $1.1652 amid the French political turmoil.

Resignation of Sébastien Lecornu

Sébastien Lecornu resigned as France’s prime minister in a surprise move that shocked the political landscape, stepping down only hours after unveiling his new cabinet, turning it into the shortest government in France’s modern history.

The withdrawal came despite efforts to form an executive team balancing economic reforms with social demands. However, Lecornu faced strong resistance from parliament and political groups opposed to policies tied to President Emmanuel Macron’s previous term.

Observers believe Lecornu may have failed to secure sufficient parliamentary support to pass his agenda, while pressure to form alliances with other factions and opposition to certain economic measures—such as deficit reduction or potential tax increases—contributed to his resignation.

Political Developments in France

Lecornu had been appointed earlier that same day in a last-ditch attempt to form a new government after weeks of complex negotiations following the early parliamentary elections in July 2025.

The elections produced a deeply divided parliament, with no party or coalition securing a majority, leading to political gridlock. Lecornu, a prominent political figure, was chosen to lead a consensus-driven government aimed at restoring stability and addressing France’s pressing economic and social challenges.

His resignation deals a heavy blow to President Emmanuel Macron, who already faces waning popularity and mounting political challenges. The current situation raises doubts about the French government’s ability to implement effective policies to address key issues such as rising energy costs, economic growth support, and maintaining competitiveness within the European market.

Bleak Outlook

The political upheaval is expected to delay negotiations on the European Union’s budget, where France plays a key role in shaping fiscal policy for the bloc.

The situation may also affect investor confidence in French bonds, as yields on French government debt have edged higher, signaling heightened perceived risk.

Analyst Commentary

• Sarah Ying, head of FX strategy at FICC, said: “The resignation of France’s new government is not an existential crisis, but it doesn’t look good domestically, particularly given the ongoing budget debates.”

• She added: “The greater risk would be a resignation from President Macron himself, though that currently seems like a low-probability scenario.”

The Japanese yen fell in the European market on Tuesday against a basket of major and minor currencies, deepening its losses for the fourth consecutive day against the US dollar and hitting a two-month low. The decline came amid continued open selling pressure, particularly following Sanae Takaichi’s victory in the Liberal Democratic Party’s leadership election.

Takaichi is set to become Japan’s first female prime minister and is viewed as having the most expansionary fiscal and monetary agenda among the five candidates vying to succeed outgoing Prime Minister Shigeru Ishiba.

Price Overview

• Yen exchange rate today: The dollar rose 0.25% against the yen to ¥150.70 — the highest level since August 1 — up from the opening price of ¥150.25, after recording an intraday low of ¥150.19.

• On Monday, the yen closed about 2% lower against the dollar, marking its third consecutive daily loss and its steepest daily decline since May 12, following recent political developments in Japan.

Sanae Takaichi’s Victory

Sanae Takaichi won the leadership of Japan’s ruling Liberal Democratic Party (LDP) following weekend elections, becoming the first woman to hold the position since the party’s founding — paving the way for her to become Japan’s next prime minister, succeeding Shigeru Ishiba.

Her victory came after a competitive race within the party, where her campaign focused on strengthening Japan’s defense capabilities, promoting industrial innovation, and maintaining economic stability amid growing global pressures.

Takaichi has been one of the most vocal critics of the Bank of Japan’s plans to normalize and tighten monetary policy after years of unprecedented easing. Her premiership is therefore expected to delay any imminent rate hikes, as she is likely to favor a more cautious, gradual approach to sustain Japan’s fragile economic growth.

After securing the party leadership, Takaichi stated at a press conference that the government and the central bank must work closely to ensure inflation is driven by demand, supported by rising wages and corporate profits.

Japanese Interest Rates

• Following these political developments, market pricing for a 25-basis-point rate hike by the Bank of Japan in October fell from 45% to 10%.

• Yen swap markets on Monday indicated a 41% probability of a rate hike by December, down from 68% on Friday.

Analyst Comments

• Chris Weston, head of research at Pepperstone Group in Melbourne, said: “We are in the eye of the storm,” noting that traders are searching for clues on how far Takaichi will go in pursuing fiscal easing.

• Weston added: “If markets sense that she intends to follow an Abe-style expansionary path, it could keep bond buyers away from the market. She must tread carefully if she chooses that route.”

Gold prices rose on Monday despite a notable strengthening of the US dollar against most major currencies, as investors sought safe-haven assets amid heightened geopolitical concerns.

The US government shutdown entered its sixth day, with repeated failures to pass a temporary funding bill due to disagreements between Republicans and Democrats. This has delayed the release of key economic data ahead of the Federal Reserve’s meeting later this month.

At the upcoming meeting, markets widely expect the Fed to cut interest rates by 25 basis points, reflecting concerns over a weakening labor market.

Geopolitical tensions also weighed on market sentiment after French Prime Minister Sébastien Lecornu resigned on Monday morning — just 24 hours after forming his government and less than a month after taking office — deepening the political crisis in the eurozone’s second-largest economy.

Meanwhile, the US dollar index rose by 0.4% to 98.1 points at 21:05 GMT, after reaching an intraday high of 98.5 and a low of 97.9.

As of 21:06 GMT, spot gold prices surged 2% to $3,984.5 per ounce.