Gold prices rose in European trade, extending gains for the fourth straight session and scaling a two-week high as the dollar loses ground against a basket of major rivals.

The decline comes ahead of the Federal Reserve's policy meeting later today, expected to hold interest rates unchanged in order to assess economic developments. 

Gold Prices Today

Gold prices rose 0.1% to $1,935 an ounce, the highest since September 5, with a session-low at $1,929, after rising 0.5% yesterday, the third profit in a row as the dollar slows down.

The Dollar

The dollar index fell 0.1% on Tuesday, extending losses for the third session away from a six-month high against a basket of major rivals.

Dollar is losing ground as investors shun new positions ahead of the Federal Reserve's meeting, which is expected to provide important clues on the future path of interest rates.

The Fed

Later today, the Federal Reserve will hold its policy meeting, expected to maintain interest rates flat at 5.5%, the highest in 22 years.

The decisions will be followed by Fed Chair Jerome Powell's speech, which could provide important clues on the likely path ahead for monetary policies.

US Rates

Pricing for a US 0.25% interest rate hike this week stands at 1%, while pricing for a similar hike in November stands at 31%.

Estimates

Analysts believe that gold prices are carrying strong momentum as global central bank pull back from their policy tightening marathons.

Future US and European data especially on consumer prices and retail sales will offer more clarity on this issue.

Chinese Gold Prices

Gold prices in China hit record highs last week as consumers buy up the safe haven to compensate the declining yuan values.

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 880.27 tonnes. 

Sterling fell in European trade on Tuesday, sharpening losses against US dollar for sixth straight session and plumbing a three-month trough on UK interest rate speculation.

Bank of England is preparing for a 0.25% interest rate hike this week, which could be the last rate hike in the current policy tightening cycle as the UK economy experiences a sharp slowdown.

GBP/USD fell 0.1% to $1.2370, the lowest since June 6, after losing 0.1% yesterday, the fifth loss in a row on UK recession concerns.

Bank of England

Bank of England is convening on Thursday to discuss monetary policies and economic conditions, expected to raise interest rates by 25 basis points to 5.5%.

This could very well be the last interest rate hike of this policy tightening cycle. 

BOE Governor Andrew Bailey said this month "The BOE is pretty close to ending its cycle of interest rate hikes according to current evidence".

UK Inflation

Later today, important UK consumer prices data will be released and will influence the decision by Bank of England.

International benchmark Brent rose in European trade for the seventh straight session, scaling a fresh 10-month high, as markets focus on the potential of extreme shortages in the market during the fourth quarter after Saudi Arabia and Russia extended their voluntary production cuts. 

Prices are also boosted on hopes of improving fuel demand in China as recent data showed the economy has recovered strongly.

Prices Today

Brent rose 0.65% to $94.85 a barrel, the highest since November 2022, with a session-low at $93.98, after rising 0.2% on Friday, the sixth profit in a row, marking the longest streak of daily gains since late August.

Brent rose 4.25% last week, the third weekly profit in a row as markets brace for supply shortages this year.

Shortages 

The International Energy Agency said the decision by Saudi Arabia and Russia to cut crude output by 1.3 million bpd until the end of the year will cause shortages in the fourth quarter of the year.

Bank of America analysts believe such cuts will send Brent prices above $100 by the end of the year.

Conversely, OPEC maintained its optimistic outlook for demand growth worldwide this year and next year,while also expecting flexible global economic growth despite higher interest rates.

Chinese Demand

Recent strong Chinese data indicated the economy is likely recovering in the third quarter of the year and exiting the recent struggles.

China's industrial production rose 4.5% in August, beating estimates of 3.9%, while retail sales rose 4.6% in August, beating estimates of 3.0%, as unemployment fell to 5.2%.

In another stimulus step to boost the economy, the People's Bank of China decided to lower the required cash reserves held by banks by 25 basis points to nearly 7.4%.

Swiss franc rose in European trade on Monday against a basket of major rivals, recovering from two-month low against US dollar on short-covering.

The gains come ahead of the Swiss National Bank's policy meeting on Thursday, expected to raise interest rates by 25 basis points to 2%.

USD/CHF 

USD/CHF fell 0.3% to 0.8949, with a session-high at 0.8977, after closing down 0.25% on Friday, the fourth loss in a row, plumbing a two-month low at 0.8977, as investors buy up the greenback.

Franc lost 0.5% against dollar last week, the ninth weekly loss in a row, and the longest such streak of weekly losses since 2014 amid a widening interest rate gap between the US and Switzerland. 

SNB

The Swiss National Bank is convening next Thursday to discuss policies and latest economic developments. 

Markets widely expect the SNB to increase interest  rates by 25 basis points to 2%, the highest since 2008.

Another SNB rate hike would shrink the interest rate gap with the US and boost investments in the franc.

A surprise decision by the SNB to maintain interest rates would be rooted in recent inflation data, which showed consumer prices fell below 2% in August.