Gold prices declined in European trading on Friday, resuming losses after a brief pause the previous day, and neared a two-week low as the metal threatened to lose its footing above the key psychological level of $4,000 per ounce, heading for its first weekly loss since August.

The drop came as profit-taking and corrective moves accelerated from record highs, while a stronger US dollar ahead of key inflation data added further pressure. The upcoming inflation report is expected to provide clear signals on the Federal Reserve’s interest-rate path.

Price overview

• Today’s gold prices: Gold fell 1.9% to $4,047.64 an ounce, down from an opening level of $4,126.94, after hitting a session high of $4,144.39.

• On Thursday, gold gained 0.7%, marking its first increase in three sessions after rebounding from a two-week low of $4,004.56 per ounce.

Weekly performance

• Over the course of the week, which concludes with Friday’s close, gold prices are down about 5%, on track for their first weekly decline since August.

• This loss ends the metal’s longest winning streak since June 2020, which lasted nine consecutive weeks.

• The precious metal recorded its sharpest one-day drop in five years on Tuesday amid aggressive profit-taking from the all-time high of $4,381.73 per ounce.

US dollar

The US Dollar Index rose about 0.2% on Friday, extending gains for a second straight session and trading near a one-week high, reflecting continued strength against a basket of major and minor currencies.

Investors remain focused on the greenback as one of the most attractive assets at the moment, particularly with growing expectations that several major central banks — including those in the UK, Japan, Canada, and Australia — will move toward more accommodative policies to support their slowing economies.

US interest rates

According to CME’s FedWatch Tool, markets currently price a 97% probability that the Federal Reserve will cut rates by 25 basis points in its October meeting, versus a 3% chance of no change.

US inflation data

Traders await key US inflation data for September, scheduled for release later today, which could shape expectations for the Fed’s policy direction.

The Bureau of Labor Statistics confirmed last week that it will release the inflation report despite the ongoing government shutdown — now in its fourth week — to allow the Social Security Administration to calculate 2026 cost-of-living adjustments for millions of recipients.

Analysts do not expect the data to derail next week’s anticipated 25-basis-point rate cut but say it could provide clues on what the Fed may do in December.

The headline Consumer Price Index (CPI) is expected to rise 3.1% year over year in September, up from 2.9% in August, while the core CPI is forecast to remain steady at 3.1%.

Julien Lafarge, Chief Market Strategist at Barclays Private Bank, said: “It would take a major upside surprise to alter market expectations for another rate cut by the Fed.”

Gold outlook

• Peter Grant, Vice President and Senior Metals Analyst at Zaner Metals, said: “All the fundamental drivers that supported gold’s rally this year remain firmly in place.”

• He added: “We saw some opportunistic buying on Thursday’s dip, which helped prices recover amid ongoing trade and geopolitical tensions.”

SPDR holdings

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Thursday, remaining at 1,052.37 metric tons.

The British pound edged lower in European trading on Friday against a basket of global currencies, extending its negative streak for the sixth consecutive session against the US dollar and nearing a weekly loss as selling pressure persisted following recent UK economic data.

This week’s data showed that UK inflation remained unchanged in September, defying expectations and easing concerns about “entrenched inflationary pressures” among Bank of England policymakers — a development that strengthens the likelihood of an interest rate cut before the end of the year.

Price overview

• Today’s exchange rate: The pound fell 0.1% to $1.3317, down from an opening of $1.3325, after hitting a session high of $1.3332.

• On Thursday, the pound lost 0.2% against the dollar — its fifth straight daily decline — and touched a two-week low of $1.3306 on Wednesday after the UK consumer price data release.

Weekly performance

Over the course of the week, which officially concludes with Friday’s settlement, the pound has fallen more than 0.8% against the US dollar, on track for its second weekly loss in the past three weeks.

UK inflation

The Office for National Statistics reported on Wednesday that headline inflation in the United Kingdom rose 3.8% year over year in September, below market expectations of a 4.0% increase and matching August’s pace.

Core inflation rose 3.5% in September, also below forecasts of 3.7% and slightly down from 3.6% in August.

The stabilization of overall inflation, coupled with the slowdown in core inflation, has eased concerns about entrenched price pressures and may prompt the Bank of England to resume monetary easing and cut rates before year-end.

UK interest rates

• Following the data, market pricing for a 25-basis-point rate cut by the Bank of England in its November meeting rose from 40% to 50%.

• To reassess these expectations, investors are closely watching key UK data releases later today, including September retail sales and October manufacturing and services performance indicators.

Pound outlook

At Economies.com, we expect that if upcoming UK data come in weaker than expected, market bets on a rate cut before the end of the year will increase — likely pushing the pound further lower against major global currencies.

The Japanese yen fell in Asian trading on Friday against a basket of major and minor currencies, extending losses for the sixth consecutive session against the US dollar and touching a two-week low, as markets continued to price in “Sanae Takaichi’s stimulus pressure.”

Japan’s first-ever female prime minister is preparing to unveil a massive stimulus package aimed at supporting the world’s fourth-largest economy — a move that could further pressure Bank of Japan policymakers and likely delay any near-term steps toward monetary normalization or rate hikes.

Price overview

• Today’s yen exchange rate: The dollar rose 0.25% against the yen to ¥152.91, its highest since October 10, up from an opening of ¥152.55, after hitting a session low of ¥152.47.

• The yen closed Thursday down roughly 0.4% versus the dollar, marking its fifth straight daily decline amid expectations of expansionary policies from Sanae Takaichi’s new administration.

Weekly performance

Over the course of the week, which officially ends with Friday’s close, the yen is down about 1.5% against the US dollar, on track for its second weekly loss in the past three weeks.

Sanae Takaichi

In a historic milestone, Japan turned a new page in its political history on Tuesday as Sanae Takaichi won the premiership, becoming the first woman ever to hold the country’s top office.

According to NHK, Takaichi secured 237 votes in the first round of parliamentary voting, eliminating the need for a runoff in the 465-seat lower house.

Her victory followed an agreement between the ruling Liberal Democratic Party and the Japan Innovation Party to form a coalition government. According to Reuters, Takaichi accepted several Innovation Party policy proposals, including reducing parliamentary seats, offering free secondary education, and freezing the food consumption tax for two years.

Takaichi had faced major political risk after her abrupt split from Komeito — the LDP’s coalition partner for more than 26 years — earlier this month.

A close ally of the late Shinzo Abe, Takaichi is known for her support of the stimulus policies that defined “Abenomics.” Analysts believe her leadership could boost Japanese equities but keep the yen under sustained pressure due to continued loose monetary policy.

After winning the LDP leadership, Takaichi pledged to strengthen Japan’s economy through aggressive spending and criticized the Bank of Japan’s interest-rate hikes.

New stimulus package

Government sources told Reuters that Prime Minister Takaichi is preparing an economic stimulus package likely to exceed ¥13.9 trillion ($92 billion) to help households cope with rising prices and inflation.

The final size of the package is still being finalized, with an announcement expected early next month.

Japanese interest rates

• Takaichi, a proponent of flexible fiscal and monetary policies, said Tuesday that monetary decisions should be left to the Bank of Japan.

• Economists generally believe the new prime minister will not obstruct the BOJ from raising rates, though most expect the next hike to come no earlier than December.

• Finance Minister Satsuki Katayama said Wednesday that close coordination between the government and the BOJ is essential to ensure policy effectiveness.

• The Bank of Japan is scheduled to announce its next monetary policy decision on October 30. Futures markets currently price about a 20% chance of a quarter-point rate hike to 0.75%.

Analyst views

Kaburuso of the Commonwealth Bank of Japan said: “Given Takaichi’s desire for close coordination between the government and the Bank of Japan, the BOJ is likely to refrain from raising rates until the Diet approves her proposed economic package.”

Gold prices rose on Thursday as the US dollar held steady against most major currencies, allowing the precious metal to climb back above the $4,100-per-ounce threshold.

The rebound comes amid renewed geopolitical tensions following Washington’s decision to impose sanctions on Russia’s two largest oil companies, part of ongoing efforts by the United States to pressure Moscow economically to end the war in Ukraine.

At the same time, Russian President Vladimir Putin warned of a “crushing” response if Russia were attacked with US-made Tomahawk missiles, which Ukraine recently requested from Washington.

Investors are now looking ahead to key US inflation data due later this week for clues on the Federal Reserve’s next policy move. Market expectations strongly favor an interest rate cut at the Fed’s upcoming meeting.

Meanwhile, the US government shutdown has entered its 23rd day, contributing to a record surge in national debt, which has now surpassed $38 trillion for the first time in the country’s history.

As of 19:18 GMT, the US Dollar Index was up slightly by less than 0.1% at 98.9 points, after hitting a session high of 99.1 and a low of 98.9.

Spot gold rose 2.1% to $4,150.9 per ounce as of 20:14 GMT.