Gold prices rose in European trade on Tuesday away from four-week lows, holding their ground above the $2600 barrier amid thin holiday trading. 

The prices are stymied by higher US 10-year treasury yields following the Federal Reserve’s bullish outlook.

The Price 

Gold prices rose 0.35% today to $2621 an ounce, with a session-low at $2612. 

On Monday, gold prices lost 0.4%, the first loss in three days, approaching four-week lows at $2583.

US Yields 

US 10-year treasury yields rose 0.3% on Tuesday to a seven-month high at 4.599%, pressuring non-yielding assets.

The developments come amid improving risk appetite as the US federal government avoided a shutdown with Congress finally passing a budget bill on Sunday.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Federal Reserve interest rate cut in January stood at just 9%. 

San Francisco Fed President Mary Dale and two other Fed policymakers said on Friday the Fed needs to resume rate cuts next year but might take its time, as the recalibration duration has ended.

SPDR 

Gold holdings at the SPDR Gold Trust fell 3.45 tons yesterday to a total of 873.95 tons.

Euro fell in European trade on Tuesday against a basket of major rivals, extending losses for the second straight day against the US dollar and approaching four-week lows under pressure from European Central Bank President Christine Lagarde’s remarks. 

The remarks were more bearish than expected, which boosted the odds of an ECB interest rate cut in January.

The Price 

The EUR/USD pair fell 0.2% today to $1.0388, with a session-high at $1.0408.

The pair closed down 0.25% on Monday, resuming losses and approaching four-week lows at $1.0343.

Lagarde

European Central Bank President Christine Lagarde said the eurozone is approaching its medium-term inflation target according to an interview with the Financial Times.

In earlier remarks, Lagarde said the ECB will cut interest rates more aggressively if inflation continues to slow down towards 2%.

She said that the eurozone is very much approaching the stage where the ECB  can announce the achievement of the 2% inflation target,

European Rates

Following the remarks, the odds of a 0.25% ECB interest rate hike rose from 55% to 65%.

Markets are betting the ECB will cut interest rates by 1.75% throughout 2025, while waiting for important eurozone growth, inflation, and unemployment data to gather more clues.

US Rates

According to the Fedwatch tool, the odds of a Fed January 0.25% interest rate cut stood at just 9%. 

The eurozone-US interest rate gap is now standing at 135 basis points in favor of the US, and will likely expand to 160 basis points in January, in turn boosting the greenback.

The Japanese yen rose in Asian trade on Tuesday against a basket of major rivals, rebounding against the dollar once more and recovering from a five-month low.

The gains come after repeated warnings from Japanese authorities and hints at impending intervention to boost the local currency if needed.

The Price

The USD/JPY pair fell 0.15% once more to 156.93 yen per dollar, with a session-high at 157.39.

The yen lost 0.5% yesterday against the dollar, resuming losses and approaching a five-month low at 157.92.

The losses come as US 10-year treasury yields rebounded to seven-month highs, renewing concerns about a wide Japan-US yields gap.

Japanese Authorities 

Japan’s finance minister Katsunubo Kato expressed concerns on Friday from sharp movements in the forex market, led by speculators, and asserted that authorities will confront such heavy movements.

It’s quite rare for Japanese officials to directly express concerns about the forex market, which indicates readiness to intervene if necessary. 

Main Inflation

Earlier Tokyo data showed main consumer prices rose 2.7%% in November, beating estimates of 2.6%, and up from 2.3% in October.

Following the data, the odds of a 0.25% interest rate hike by the Bank of Japan in January rose from 45% to 55%.

Ripple lost ground on Monday amid weak risk appetite and tepid demand on crypto assets before the end of 2024 with investors preparing to reconfigure their wallets.

Earlier data showed the US consumer confidence index fell to 104.7 in December from 111.7 in the previous reading, while analysts expected an uptick to 112.9.

The Federal Reserve decided to cut interest rates by 25 basis points last week after two consecutive rate cuts in previous meetings. 

The Fed hinted at a slowed down pace of interest rate cuts in 2025 after revealing in its future outlook a total of only 50 basis points of interest rate cuts next year as inflation continues to persist.

Ripple

On trading, Ripple tumbled 3.7% as of 18:43 GMT to $2.17 on Coinmarketcap.