Gold prices fell in European trade on Friday and resumed the losses after a short hiatus yesterday, moving closer to five-week lows and on track for the worst weekly performance in 2025 on weaker haven demand as US-China trade tensions receded.

Most remarks by Fed officials this week were more bullish tann expected, tanking the odds of a Fed rate cut until October.

Prices

Gold prices fell 1.35% today to $3195 an ounce, with a session-high at $3252.

On Thursday, gold rallied 1.95% away from a five-week trough at $3120.99.

Weekly Trades

Gold prices are down 3.95% so far this week, on track for the third weekly loss in a month, and the heftiest in 2025.

Trade Developments

The US and China agreed to pause most tariffs for 90 days, in turn reducing the severity of the recent devastating trade war.

Trump said he doesn’t expect tariffs on Chinese products to return to 145% after the pause, and that he expects both countries to reach a final agreement.

US Rates

Chicago Fed President Austin Goolsby said the recent data that showed lower inflation doesn’t necessarily reflect the impact of the new US tariffs on imports, and the Fed requires more data to gauge the path ahead clearly.

Fed Deputy Governor Philip Jefferson said that latest inflation data shows progress towards achieving the 2% inflation target.

However, he believes the outlook has become unclear due to the latest tariffs and their potential impact on prices.

 According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in June stood at just 8%, and the odds of such a cut in July stood at 40%.

Traders are now pricing in 50 basis points of US interest rate cuts this year, likely starting next September.

Federal Reserve Chair Jerome Powell is scheduled to speak later today in Washington and could provide clues on the bank’s future monetary policy and thinking.

SPDR

Gold holdings at the SPDR Gold Trust fell 8.89 tons yesterday to a total of 927.62 tons, an April 8 trough.

Sterling rose in European trade on Friday against a basket of major rivals, moving in a positive zone for the second straight session against the US dollar and on track for a new weekly profit following strong UK data.

The UK economy grew by the best pace in a year during the first quarter of 2025, heaping more pressure on Bank of England policymakers and hurting the odds of a UK June rate cut.

The Price

The GBP/USD price rose 0.15% today to $1.3319, with a session-low at $1.3299.

The pound rose 0.35% yesterday against the dollar, marking the second profit in three days following strong UK data.

Weekly Trades

The pound is up 0.25% so far this week on the dollar, on track for the second weekly profit in a row.

UK Economy

Earlier UK data showed the GDP growth rate at 0.7% in the first quarter of 2025, the best rate in a year, and up from a 0.1% growth rate in the previous quarter.

The economy is expected to expand even further, especially after the UK government reached a major trade deal with the US in recent days.

UK Rates

Following the growth data, the odds of a UK 0.25% interest rate cut in June fell from 30% to 25%.

The recent Bank of England vote in favor of a rate cut last week showed clear divisions between members on the path of policy easing.

Interest Rate Gap

Following the central banks meetings last week, a 0.25% interest rate between the UK and the US emerged once more in favor of the US, but could disappear quickly in upcoming months as the Fed prepares for rate cuts while the BOE is poised to hold rates steady.

The Japanese yen rose in Asian trade on Friday against a basket of major rivals, expanding gains for the fourth straight session against the US dollar and hitting a week high ahead of a new round of trade talks between Japan and the US next week.

The yen is also bolstered by a drop in US 10-year treasury yields after negative surprises from recent US data, which boosted the odds of Fed rate cuts this year.

The Price

The USD/JPY fell 0.5% today to 144.96,  a week low, with  a session-high at 145.68.

The yen rose 0.75% on Thursday against the dollar, marking the third profit in a row on haven demand following weak US data.

Trade Talks

Sources indicate that chief Japanese trade negotiator, Ryusi Akazo, could travel to Washington early next week for a third round of trade talks with the US.

Japan’s finance minister Katsunubo Kato said on Friday he’ll discuss forex exchange issues with US Treasury Secretary Scott Bessent soon, with an aim at containing extreme currency fluctuations. 

Kato said the Japanese government remains committed to its investments in US treasury notes as a high-liquidity reliable asset.

Economic Recession

Earlier data showed the Japanese economy contracted for the first time in a year in the quarter ending March, indicating the fragility of the Japanese economy.

Japan’s GDP shrank 0.2% in the first quarter, missing estimates of a 0.1% dip, and after a 0.7% growth rate in the fourth quarter of 2024.

US Yields

US 10-year treasury yields fell over 0.4% on Friday away from recent five-week highs at 4.548%, pressuring the dollar.

Recent weak inflation data bolstered the odds of two 0.25% Fed rate cuts in the second half of the year. 

Gold prices rose on Thursday as the dollar index fell against most major rivals, with concerns resurfacing about the US economy after Fed Chair Jerome Powell’s statements.

Earlier data showed US producer prices rose 2.4% y/y in April, below estimates of a 2.5% rise, and down from 2.7% in the previous reading.

US retail sales rose 0.1% in April, beating expectations of no change, but below March’s 1.4% increase.

US unemployment claims were unchanged at 229 thousand in the week ending May 10, same as the previous reading, and matching expectations. 

Federal Reserve Chair Jerome Powell warned today from the increasing chances of supply shocks and subsequent higher prices in upcoming years, adding the Fed will amend its framework to account for fundamental changes in inflation and interest rate forecasts.

Otherwise, the dollar index fell 0.1% as of 18:59 GMT to 100.9, with a session-high at 101.06, and a low at 100.5.

On trading, gold spot prices rallied 1.1% as of 19:02 GMT, or $35.60 to $3224.1 an ounce.