Gold prices rallied in European trade on Friday to a three-month high, resuming gains and approaching record highs at $2800, and about to mark the fourth weekly profit in a row.

The US dollar is stalling after less aggressive remarks from US President Donald Trump on tariffs, while he urged the Federal Reserve to cut interest rates.

Prices 

Gold prices rose 0.85% to $2778 an ounce, an October 31 high, with a session-low at $2753.

On Thursday, prices lost 0.1%, the first loss in four days on profit-taking.

Gold prices marked a record high in late October 2024 at $2790.11 before entering a correction in the short and medium term.

Weekly Trades 

Gold prices are up 2.75% so far this week, on track for the fourth weekly loss in a row.

US Dollar

The dollar index fell 0.5% on Friday, expanding the losses for the second session and hitting a five-week trough at 107.56 against a basket of major rivals. 

A weaker dollar makes greenback-denominated gold futures cheaper to holders of other currencies.

The decline comes as the new US administration charts a more cautious path than expected on tariffs, thus reducing concerns about inflation and policy tightening measures. 

Trump

US President Donald Trump spoke ahead of the World Economic Forum in Davos on Thursday, in words that were aggressive, alarmist, and threatening at times. 

Trump spoke about tariffs, inflation, international relations, and said he’s going to push for lower rates in the US and worldwide. 

He also sent a message to each company in the world, to come and build their products in the US with very low taxes.

But if they refused to shift their manufacturing to the US, he threatened heavy taxes. 

US Rates

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in January stood at just 1%, and the odds of such a cut in March improved to 30%.

SPDR

Gold holdings at the SPDR Gold Trust fell 5.17 tons yesterday to a total of 864.19 tons, the lowest since December 19.

The euro rushed higher on Friday to a five-week high against the US dollar, expanding the gains for the second session and on track for the first weekly profit since 2023 after US President Donald Trump’s statements on cutting interest rates.

Now investors await a spate of important eurozone data later today, which would provide important clues on the performance of the economy in the first quarter of 2025.

The Price

The EUR/USD rose 0.55% today to $1.0470, the highest since December 18, with a session-low at $1.0411.

The pair closed up 0.1% on Thursday, resuming gains following weak US data.

Weekly Trades 

The eurozone is up 2% so far this week against the greenback, about to mark the second weekly profit in a row, and the largest since November 2023.

Trump

US President Donald Trump spoke ahead of the World Economic Forum in Davos on Thursday, in words that were aggressive, alarmist, and threatening at times. 

Trump spoke about tariffs, inflation, international relations, and said he’s going to push for lower rates in the US and worldwide. 

He also sent a message to each company in the world, to come and build their products in the US with very low taxes.

But if they refused to shift their manufacturing to the US, he threatened heavy taxes. 

Lagarde 

European Central Bank President Christine Lagarde said in Davos on Wednesday that the eurozone inflation is expected to hit the 2% target this year.

Lagarde said the decline gives the European Central Bank the space to ease monetary policies and boost struggling economies.

As for Trump’s tariff threats, Lagarde said the ECB won’t react to Trump’s statements until they’re acted upon.

Following the remarks, the odds of an ECB interest rate cut by 0.25% in January rose from 60% to 70%.

The Bank of Japan gained ground in Asian trade on Friday against a basket of major rivals, moving in a positive zone against the dollar for the second straight session, and about to hit five-week highs following the BOJ’s decision.

As expected by most analysts, the Bank of Japan hiked interest rates to 2008 highs and pointed to improvements in wages. 

The BOJ vowed to continue normalizing its monetary policies and raise rates if the economic outlook was achieved. 

The Price

The USD/JPY fell 0.7% to 154.99, with a session-high at 156.41.

The yen rose 0.3% yesterday against the dollar, resuming gains and approaching a five-week high at 154.77.

Weekly Trades

The yen is up 0.8% so far on the dollar this week, about to mark the second weekly profit in a row as the Japan-US interest rate gap shrank.

BOJ

The Bank of Japan voted to raise interest rates by 25 basis points at the January 23-24 meeting to 0.5%, the highest since 2008, and the third such Japanese rate hike since policy normalization started last year. 

It was an 8-1 margin vote in favor of the hike, indicating increasing confidence by Japanese policymakers in the pace of growth for wages and prices.

The BOJ decided at the March 2024 meeting to exit negative rates, and raised short-term interest rates by 20 basis points then to 0.1%, the first such hike since 2007.

Policy Statement 

The BOJ said in its policy statements that the odds of achieving its targets are increasing, as many corporations vowed to continue raising wages in yearly negotiations this year.

The central bank believes that core inflation is heading towards the 2% medium term target, with financial markets stable overall. 

It noted that real interest rates remain very low, with the bank continuing to hike rates as its economic goals are carried out.

Economic Forecasts 

The BOJ expects main consumer prices to rise 2.7% in the financial year of 2024, up from 2.5% in previous forecasts.

It estimates 2025 main consumer prices to rise 2.4%, up from 1.9% in previous forecasts.

It estimates GDP growth at 0.5% in 2024, down from 0.6% in previous forecasts, and 1.1% in 2025. 

The Bank of Japan voted to raise interest rates by 25 basis points at the January 23-24 meeting to 0.5%, the highest since 2008, the third such Japanese rate hike since policy normalization started last year. 

It was an 8-1 margin vote in favor of the hike, indicating increasing confidence by Japanese policymakers in the pace of growth for wages and prices.

The BOJ decided at the March 2024 meeting to exit negative rates, and raised short-term interest rates by 20 basis points then to 0.1%, the first such hike since 2007.