Gold prices fell in European trade for the fourth straight session, hitting two-week lows on profit-taking off nine-month highs while the dollar rebounds. 

Despite the decline, the precious metal is heading for the third monthly profit in row as the dollar swoons on prospects of a slower policy tightening pace by the Fed. 

Gold Prices Today

Gold prices fell 0.9% to $1,904 an ounce, the lowest since January 19, with a session-high at $1,927. 

Gold prices lost 0.3% yesterday, the third loss in a row on profit-taking off nine-month highs at $1,949.

The Dollar

The dollar index rose 0.3% on Tuesday, extending gains for the fourth straight session and hitting two-week highs at 102.60 against a basket of major rivals.

Dollar's recovery comes on short-covering while US 10-year treasury yields rebound. 

Monthly Trades

Gold prices are up 4.5% so far in January on track for the third monthly profit in row, the longest such streak of gains since April 2020.

Such gains after two years of heavy losses are due to expectations the Fed will end its cycle of policy tightening and rate hikes soon, sending the dollar sharply down. 

The Fed

The Federal Reserve is convening this week to decide on policies, expected to issue a reduced rate hike of 0.25% this time around.

Actual Demand

Chinese government noted that the current wave of Covid 19 infections in China is getting to an end if no major outbreaks occurred during the lunar near year holiday.

Thus it's expected for actual demand on gold to improve as Chinese economy opens up once more.

The SPDR

Gold holdings at the SPDR Gold Trust fell 1.44 tones yesterday, the second decline in a row to a total of 917.06 tones, a two-week low. 

Will gold prices give up $1,900? 

Most commodity analysts don't expect gold prices to fall below $1,900 ahead of the Federal Reserve's meeting decisions, and if the meeting resulted in signals of ending policy tightening, gold prices are expected to pierce the $1,950 barrier. 

Euro fell in European trade against dollar for fourth straight session, hitting two-week lows on profit-taking off nine-month highs. 

The common currency is still on track for the fourth monthly profit in a row as the ECB commits to its stance of aggressive policy tightening. 

EUR/USD fell 0.3% to 1.0812, the lowest since January 20, with a session-high at 1.0860. 

Euro closed down 0.2% yesterday, the third profit in a row off nine-month highs at 1.0929. 

Monthly Trades

Euro is up 1% so far against dollar in January on track for the fourth monthly profit in a row, the longest such streak since May 2020. 

The strong gains came as concerns about a widening policy gap between the US and Europe fade with the ECB preparing for a 0.5% rate hike, compared to a 0.25% rate hike by the Fed. 

The ECB

ECB President Christine Lagarde said recently that inflation remains too high and the bank is committed to continuously increase interest rates until inflation is brought back to 2%.

Lagarde once again repeated the use of the phrase "staying the course" when talking about interest rate decisions at upcoming meetings, meaning the current pace will be maintained at least until the second quarter of the year.

Other ECB members strongly hinted at multiple 0.5% rate hikes in both February and March.

Estimates

Despite current losses, analysts still expect the euro to pierce $1.1 in the short term as the ECB prepares a rate hike that's double the hike of the Fed.

Broadly, the euro is expected to advance against most major rivals to year-highs.

How would higher interest rates impact euro?

Naturally, euro is expected to extend gains against a basket of major rivals as the ECB prepares consecutive policy hikes this year.

Gold prices fell on Monday as the dollar advanced against a basket of major rivals and amid speculation for the Federal Reserve's upcoming meeting. 

A batch of corporate results will be released this week, on top of which Apple, Meta, Amazon, Alphabet, and Twitter. 

The dollar index rose 0.2% to 102.1 as of 18:36 GMT, with a session-high at 102.2, and a low at 101.6. 

Gold spot prices fell 0.3%, or $6.20 to $1,923 as of 18:38 GMT. 

Gold Prices 

Now markets await important policy meetings by major central banks in the US, UK, and Europe this week.

All are expected to increase interest rates and extend their tightening policies to control stubbornly high prices.

US stock indices closed lower on Monday as markets await important corporate results and the Fed's policy meeting. 

A batch of corporate results will be released this week, on top of which Apple, Meta, Amazon, Alphabet, and Twitter. 

Dow Jones fell 0.1%, or 40 points to 33,938, while S&P 500 shed 0.1%, or 40 points to 33,938, as NASDAQ gave up 1.7%, or 200 points to 11,421. 

What's awaited for this week? 

Now markets await important policy meetings by major central banks in the US, UK, and Europe this week.

All are expected to increase interest rates and extend their tightening policies to control stubbornly high prices.