Gold prices rose more than 1.5% in European trading on Monday, recovering from a one-week low and heading for their first gain in four sessions, supported by lower global oil prices following progress in negotiations between the United States and Iran in Switzerland.

With markets heavily pricing in the possibility of a US interest rate hike this year, particularly after the Federal Reserve's latest hawkish meeting under Kevin Warsh, investors are awaiting further decisive clues this week regarding the path of US monetary policy.

The Price

• Gold prices today: Gold rose more than 1.5% to $4,220.71, from an opening level of $4,155.54, after touching an intraday low of $4,136.65.

• At Friday's settlement, gold lost 1.3%, marking a third consecutive daily decline and hitting a one-week low of $4,122.06 per ounce.

• The precious metal declined 1.5% last week, posting a third consecutive weekly loss due to rising US dollar levels and Treasury yields following the Federal Reserve meeting.

Global oil prices

Global oil prices fell around 2% on Monday and are on track to reach their lowest levels in several months, helped by the passage of additional oil tankers through the Strait of Hormuz and progress in peace negotiations between the United States and Iran.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap to reach a final agreement within 60 days, representing the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

US interest rates

• The Federal Reserve left interest rates unchanged last week for a fourth consecutive meeting.

• The Federal Open Market Committee voted unanimously (12-0) to keep the benchmark federal funds rate within a range of 3.50% to 3.75%, the lowest level since September 2022.

• New Federal Reserve Chairman Kevin Warsh introduced a major revision to the monetary policy statement by removing language that had previously suggested a bias toward future interest rate cuts, signaling a more restrictive and cautious stance.

• Policymakers unanimously removed all previous projections that had indicated interest rate cuts this year, while 9 of the 18 committee members now expect at least one rate increase before the end of 2026.

• Following the meeting, according to CME Group's FedWatch Tool, market pricing for the Federal Reserve to leave rates unchanged at its July meeting fell from 91% to 72%, while the probability of a 25-basis-point rate hike increased from 9% to 28%.

• Market pricing for the Federal Reserve to keep rates unchanged at its December meeting dropped from 45% to 15%, while expectations for a 25-basis-point rate increase rose from 55% to 85%.

• To reassess those expectations, investors are closely monitoring upcoming US economic data in addition to comments from Federal Reserve officials.

Gold outlook

Edward Meir, an analyst at Marex, said: "The situation in Switzerland is very different from what it was just hours ago when both sides were arguing, but it now appears that they are making some progress."

Meir added: "We will continue to trade on geopolitical signals for a while longer, but the situation remains volatile, so it may be best to watch developments from the sidelines for now."

SPDR Fund

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged on Friday, leaving total holdings at 1,020.49 metric tons, the highest level since June 4.

The euro fell in European trading on Monday against a basket of global currencies, resuming losses that paused on Friday against the US dollar. The single currency is moving back toward its lowest level in three months as investors continue to favor the US dollar as the most attractive available investment, particularly after the Federal Reserve's hawkish policy meeting, which significantly strengthened expectations for a US interest rate hike in December.

After the European Central Bank reiterated at its latest meeting that it is not committed to a predetermined path for monetary policy or interest rates, investors are awaiting further key economic data from the euro area to reassess expectations for European interest rates.

The Price

• Euro exchange rate today: The euro fell 0.1% against the dollar to $1.1453, from an opening level of $1.1465. The session high was recorded at $1.1474.

• The euro ended Friday up 0.1% against the dollar, its first gain in three sessions, after earlier touching a three-month low of $1.1418.

• The euro lost 0.9% against the dollar last week, marking its second weekly decline in the past three weeks, following the Federal Reserve's hawkish meeting under new Chairman Kevin Warsh.

US dollar

The US Dollar Index rose 0.15% on Monday, resuming gains that paused on Friday and moving back toward a 13-month high, reflecting continued strength in the US currency against a basket of major and minor currencies.

The advance is being driven by demand for the dollar as the most attractive available investment, especially after the Federal Reserve's latest meeting, which was more hawkish than markets had anticipated and significantly boosted expectations for at least one US interest rate increase this year.

This has outweighed the negative impact of fading safe-haven demand following the conclusion of the first round of US-Iran negotiations in Switzerland, which resulted in a 60-day roadmap aimed at reaching a final agreement between the two sides.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap to reach a final agreement within 60 days, marking the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

European interest rates

• Reports: The European Central Bank is considering pausing monetary policy normalization in July if energy prices remain at current levels.

• Money market pricing for a 25-basis-point ECB rate hike in July currently remains stable at around 30%.

• Investors are awaiting additional economic data from the euro area, particularly inflation, unemployment, and wage figures, to reassess the above expectations.

The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, resuming losses that were briefly interrupted on Friday against the US dollar. The currency is once again approaching a two-year low as Japanese authorities continue to stress their readiness to intervene in the foreign exchange market to protect the yen from excessive volatility.

The US dollar continues to receive strong support from investors seeking the most attractive available investment opportunities following the Federal Reserve's hawkish meeting last week. This has overshadowed the negative impact of declining safe-haven demand after the conclusion of the first round of US-Iran negotiations in Switzerland, which resulted in a 60-day roadmap aimed at reaching a final agreement between the two sides.

The Price

• Japanese yen exchange rate today: The dollar rose 0.25% against the yen to ¥161.61, from an opening level of ¥161.22. The session low was recorded at ¥161.22.

• The yen ended Friday up 0.1% against the dollar, its first gain in six sessions, as part of a recovery from a two-year low of ¥161.81.

• The yen lost 0.7% against the dollar last week, marking its third weekly decline in a month, as US Treasury yields rose following the Federal Reserve meeting.

Japanese authorities

Japanese authorities are closely monitoring movements in the currency market as the yen approaches its weakest levels in 40 years after moving beyond the key ¥160-per-dollar threshold. The level is widely viewed as a red line that could prompt renewed intervention to support the currency.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen's decline. At the time, the exchange rate reached ¥160.72 per US dollar, its weakest level since July 2024.

Japanese Finance Minister Satsuki Katayama said during her latest press conference on Monday that authorities are fully prepared to take decisive action and intervene directly in the foreign exchange market at any time to protect the yen from speculative movements.

Katayama stressed that the ministry's position remains unchanged, stating: "We will respond appropriately and directly to foreign exchange market fluctuations whenever necessary." She deliberately refrained from identifying a specific exchange rate as a trigger for intervention, as part of a strategy of constructive ambiguity designed to deter speculators.

Views and analysis

Matt Simpson, Senior Market Analyst at StoneX, said: "Japan's Ministry of Finance may be concerned about the US dollar rising against the yen to its highest level of 2024."

Simpson added: "It may also feel powerless to do much about it, as intervening against the backdrop of a hawkish Federal Reserve and strong US economic data could prove both costly and ineffective."

Japanese interest rates

• The Bank of Japan raised its benchmark interest rate by 25 basis points last week to 1.0%, the highest level since 1995, marking another historic step in the normalization of monetary policy in the world's fourth-largest economy.

• Bank of Japan Deputy Governor Ryozo Himino said on Friday that inflation could exceed the central bank's 2% target and warned about the cost of delaying rate hikes, reaffirming the bank's intention to continue raising borrowing costs.

• Economic surveys indicate that the most likely baseline scenario is for the Bank of Japan to deliver an additional 25-basis-point rate increase in December.

• Market pricing for a quarter-point rate hike at the Bank of Japan's July meeting currently remains below 25%.

• Investors are awaiting additional inflation, unemployment, and wage data from Japan to reassess those expectations.

US dollar

The US Dollar Index rose 0.15% on Monday, resuming gains that paused on Friday and moving back toward a 13-month high, reflecting continued strength in the US currency against a basket of global currencies.

The advance is being driven by demand for the dollar as the most attractive available investment, particularly after the Federal Reserve's latest meeting, which was more hawkish than markets had anticipated and significantly strengthened expectations for at least one US interest rate hike this year.

That has outweighed the negative impact of fading safe-haven demand following the conclusion of the first round of US-Iran negotiations in Switzerland, which produced a 60-day roadmap aimed at reaching a final agreement between the two countries.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap toward a final agreement within 60 days, representing the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

Bitcoin continued to trade sideways below the $63,000 level on Friday following Thursday's decline. The BTC/USD pair remains confined within a mildly descending channel on the 60-minute chart.

The world's largest cryptocurrency fell below its 100-hour moving average by several levels, although it managed to stage a modest rebound, helping it avoid entering oversold territory according to the 14-hour Relative Strength Index (RSI).

From a fundamental perspective, BTC/USD is trading during a relatively active period for US markets. Initial jobless claims released on Thursday came in slightly above expectations at 226,000 compared with forecasts of 225,000, though they declined from the previous week's reading of 230,000.

Economic data

The Philadelphia Fed Manufacturing Index for June also exceeded expectations, coming in at 10.3 points compared with forecasts of 10.0 points, after registering -0.4 points in the previous month.

In other economic data, May retail sales surpassed expectations, rising 0.9% month-over-month compared with forecasts of 0.5%. Core retail sales, excluding automobiles, increased 0.8%, also beating expectations of 0.5%.

Pending home sales likewise came in stronger than expected, rising 3.8% on a monthly basis compared with forecasts of 0.8%.

Earlier in the week, US building permits for May came in below expectations at 1.413 million, versus forecasts of 1.420 million, and down from 1.423 million in April.

Housing starts also missed expectations, registering 1.177 million units compared with forecasts of 1.430 million and down from 1.392 million in the previous month.

From a technical perspective, Bitcoin remains within a descending channel on the 60-minute chart, although the 14-hour RSI has recently rebounded, helping the market avoid slipping into oversold conditions.

As a result, buyers may attempt to extend the current rebound toward the $64,493 level, with a further upside target at $66,796.

On the downside, sellers may look to take profits near $60,564, or push the price lower toward the $58,125 level.

Hawkish policy and potential rate hike

The Federal Reserve left interest rates unchanged within a range of 3.50% to 3.75% at its first meeting under new Chairman Kevin Warsh, who began his tenure with a broad review of policy. Nearly half of Fed policymakers now expect interest rates to rise this year as inflation concerns continue to intensify.

According to data from the London Stock Exchange Group, the federal funds futures market is now fully pricing in an interest rate increase by October. Strong retail sales data has further reinforced expectations that monetary tightening will continue.

The US Dollar Index, which tracks the performance of the US currency against a basket of peers including the yen, euro, and British pound, slipped 0.1% to 100.7 points, remaining near its highest level since May 2025.