Gold prices rose in the European market on Monday to hold above a two-week low recorded earlier in Asian trading, with buying activity emerging from low levels ahead of talks between the United States and Ukraine to end the war ongoing in Eastern Europe for more than three years.

The recovery of the precious metal "gold" is being capped by the rise of the US dollar in the foreign exchange market, as markets await further evidence on whether the Federal Reserve will cut interest rates in September.

Price Overview

• Gold prices today: Gold rose by about 0.7% to $3,358.46, from the opening level of $3,336.08, and recorded a low at $3,323.64, the lowest since August 1.

• At Friday’s settlement, gold prices posted a rise of less than 0.1%, their third gain in the last four days, supported by the decline in the US dollar.

• Gold lost 1.8% last week, marking the first weekly loss in three weeks, after the release of strong US producer price and retail sales data.

US-Ukraine Talks

The main event for investors on Monday is a meeting between Trump and Zelensky, joined by some European leaders, as Washington presses Ukraine to accept a quick peace deal to end the deadliest war in Europe in 80 years.

Trump is relying on Zelensky to reach an agreement following his meeting with Russian President Vladimir Putin in Alaska, where he appeared more aligned with Moscow in seeking a peace deal rather than a ceasefire first.

Sources familiar with Moscow’s thinking said Russia would give up small pockets of occupied Ukrainian territory, while Kyiv would abandon large swathes of its eastern lands that Moscow has failed to control, under peace proposals discussed by Putin and Trump during their Alaska summit.

US Dollar

The US dollar index rose by more than 0.2% on Monday, beginning to recover from a two-week low, reflecting a rebound in the US currency against a basket of major and minor peers.

US Interest Rates

• Following strong US producer price and retail sales data, and according to CME’s FedWatch tool: the probability of a 25-basis-point rate cut at the September meeting fell from 99% to 85%, while the probability of no change rose from 1% to 15%.

• The probability of a 25-basis-point rate cut in October fell from 99% to 93%, while the probability of no change rose from 1% to 7%.

• Expectations of a 50-basis-point rate cut in either the September or October meetings have completely disappeared.

• Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said a half-point rate cut in September is unjustified, a day after Treasury Secretary Scott Bessent suggested it was possible.

• To reprice these probabilities, investors are closely watching US economic data and comments from Federal Reserve officials.

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said: Gold was in a defensive position at the start of the day but managed to reverse course as buyers emerged around $3,330 as an investment option. US Treasury yields gave up part of Friday’s gains, which also helped ease the pressure on gold prices.

Waterer added: We are currently seeing limited moves in both directions ahead of what could be crucial White House meetings this week with Zelensky returning to Washington.

SPDR Fund

Gold holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, rose by about 4.01 metric tons on Friday, bringing the total to 965.37 metric tons, the highest since September 9, 2022.

The euro rose in the European market on Monday against a basket of global currencies, maintaining its gains for the second consecutive day against the US dollar, nearing a two-week high, ahead of an important meeting between US President Donald Trump and his Ukrainian counterpart Volodymyr Zelenskiy.

The odds of a European interest rate cut in September have declined, due to persistent inflationary pressures currently weighing on monetary policymakers at the European Central Bank. To reassess those odds, investors are awaiting the release of more economic data from the eurozone.

Price Overview

• Today’s euro exchange rate: the euro rose against the dollar by 0.1% to (1.1715$), from Friday’s closing price of (1.1703$), recording a low of (1.1693$).

• The euro ended Friday’s session up about 0.5% against the dollar, resuming gains that had paused the previous day amid corrections and profit-taking from the two-week high at 1.1730$.

• The euro posted a 0.55% gain against the dollar last week, marking its second consecutive weekly increase, driven by fading expectations of a European rate cut versus rising expectations of a US rate cut.

Trump – Zelenskiy Meeting

The main event for investors on Monday is a meeting between Trump and Zelenskiy, joined by some European leaders, at a time when Washington is pressuring Ukraine to accept a quick peace deal to end the bloodiest war in Europe in 80 years.

Trump is relying on Zelensky to reach a deal after his meeting with Russian President Vladimir Putin in Alaska, where he appeared more aligned with Moscow in seeking a peace agreement rather than a ceasefire first.

European Interest Rates

• Recent eurozone inflation data showed persistent pressures on monetary policymakers at the European Central Bank.

• According to some Reuters sources, a clear majority at the ECB’s latest meeting favored keeping interest rates unchanged in September, for the second consecutive meeting.

• Money market pricing for a potential 25-basis-point rate cut by the ECB in September is currently stable below 30%.

• To reassess these odds, investors in the coming period are awaiting further economic data from Europe, along with remarks from ECB officials.

The Japanese yen declined in Asian markets on Monday at the start of the week’s trading against a basket of major and minor currencies, moving into negative territory against the US dollar and retreating from its three-week high, as the Japanese government ignored US pressure on the Bank of Japan to raise interest rates.

With the odds of a 25 basis point rate hike by the Bank of Japan in September still incomplete, markets are awaiting further evidence to clarify the path of Japanese monetary policy normalization during the remainder of this year.

Price Overview

• Today’s exchange rate for the Japanese yen: the dollar rose against the yen by about 0.3% to (147.58¥), from today’s opening price of (147.15¥), recording a low of (147.08¥).

• The yen ended Friday’s session higher by about 0.45% against the dollar, marking its third gain in four days and approaching a three-week high at 146.21 yen, supported by strong data on Japanese economic growth in the second quarter of this year.

• The yen posted a 0.4% weekly gain against the dollar last week, its third weekly increase in the past month, driven by rising expectations of a US interest rate cut in September.

US Pressure

The Japanese government late last week ignored rare and direct comments from US Treasury Secretary Scott Bessent, who said the Bank of Japan is “lagging behind” in its monetary policy — remarks seemingly aimed at pressuring the central bank to raise interest rates.

Japanese Interest Rates

• The market is currently pricing in around a 40% probability that the Bank of Japan will raise interest rates by 25 basis points at its September meeting.

• To re-evaluate these odds, investors are awaiting additional data on inflation, unemployment, and wages in Japan.

• Minutes from the June monetary policy meeting showed that some Bank of Japan board members said the central bank would consider resuming interest rate hikes if trade tensions eased.

Gold prices held steady during Friday’s trading as the US dollar weakened against most major currencies and markets assessed the latest US inflation data.

Figures released today showed retail sales rising 0.5% month-on-month in July, in line with expectations, indicating resilient consumer spending in the US despite high tariffs.

A University of Michigan survey also revealed that US consumer sentiment fell to 58.6 points in August from 61.7 in July, marking its first decline in four months.

Government data yesterday showed the US producer price inflation index increasing 0.9% month-on-month in July, exceeding analysts’ forecasts of a 0.2% rise.

Similar US data earlier this week showed that the annual growth rate of the consumer price index remained steady at 2.7% in July, below expectations for an increase to 2.8%.

Core inflation — which excludes volatile food and energy prices — rose to 3.1% in July, above expectations of 3% and compared to 2.9% in June.

According to the FedWatch tool, investors now see a 99% probability of a 25 basis point interest rate cut by the Federal Reserve in September, compared to 94% yesterday and 57% a month ago.

Analysts also see a 61% chance of another 25 basis point cut in October, up from 34% a month ago, along with a 51% probability of a similar cut in December versus 25% a month ago.

Meanwhile, the US dollar index fell 0.4% to 97.8 at 20:02 GMT, after hitting a high of 98.2 and a low of 97.7.

In commodities trading, spot gold was steady in negative territory at $3,380.9 an ounce at 20:03 GMT, while US gold futures posted weekly losses of around 3%.