Gold prices rose in European markets on Tuesday, extending gains for a second consecutive session and continuing to shatter record levels, after breaking above the $4,700-per-ounce threshold for the first time ever. The move was supported by the current pullback in the US dollar, which has been hit hard by President Donald Trump’s tariff threats.

With the first Federal Reserve policy meeting of 2026 approaching, investors are closely monitoring the release of further key US economic data in an effort to gather clearer signals on the path of US interest rates this year.

Price Overview

• Gold prices today: Gold prices climbed by about 1.0% to $4,717.12, marking a fresh all-time high, from the session opening level of $4,670.99, while recording a low at $4,659.65.

• At Monday’s settlement, the precious metal posted a gain of 1.6%, marking its first advance in three sessions, as investors turned to safe-haven assets amid escalating global geopolitical tensions.

The US Dollar

The dollar index fell by 0.2% on Tuesday, extending losses for a second consecutive session and touching a one-week low at 98.84 points, reflecting continued weakness in the US currency against a basket of major and secondary currencies.

Renewed threats by US President Donald Trump to impose tariffs on European allies revived the so-called “Sell America” trade that followed the Liberation Day tariff announcements in April last year, when US equities, Treasury bonds, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors’ retreat from dollar-denominated assets reflects a loss of confidence in the US administration and growing strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon seek to de-escalate these threats, as it did with previous tariff announcements, securing control over Greenland remains a core national security objective for the current administration.

Trump’s Tariff Threats

Trump said over the weekend that he would impose additional tariffs of 10% starting February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

Major European Union countries on Sunday condemned the tariff threats over Greenland, describing them as blackmail, while France proposed responding with a set of unprecedented economic countermeasures.

EU diplomats said the bloc’s ambassadors reached a preliminary agreement on Sunday to intensify efforts aimed at dissuading Trump from imposing tariffs on European allies.

US Interest Rates

• According to the CME FedWatch tool from CME Group, pricing for the probability of keeping US interest rates unchanged at the January 2026 meeting currently stands at 95%, while pricing for a 25-basis-point rate cut remains at 5%.

• Investors are currently pricing in two US interest rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• To reprice these expectations, investors are closely tracking upcoming US economic data releases.

• The US Supreme Court is expected this week to consider a case related to Trump’s attempt to dismiss Federal Reserve Governor Lisa Cook.

• The Federal Reserve is widely expected to keep interest rates unchanged at its meeting scheduled for January 27–28, despite Trump’s calls for rate cuts.

Outlook for Gold

Tim Waterer, Chief Market Analyst at KCM Trade, said Trump’s “disruptive” approach to international affairs and his push for lower interest rates are highly supportive of precious metals, as clearly reflected in the sharp rally in gold and silver prices.

Kelvin Wong, Asia-Pacific market analyst at OANDA, said the Federal Reserve is expected to continue its rate-cutting cycle in 2026 due to a slowing labour market and weakening consumer confidence. Wong expects the first rate cut to occur either in June or July.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Monday, leaving total holdings steady at 1,085.67 metric tons — the highest level since May 3, 2022.

Sterling rose in European trading on Tuesday against a basket of global currencies, extending its gains for a second consecutive session against the US dollar and hitting a one-week high, supported by continued weakness in the US currency following President Donald Trump’s threats over Greenland.

Investors are awaiting key UK labour market data later today, which is expected to provide clearer signals on the likelihood of an interest rate cut by the Bank of England when it holds its first meeting of the year in February.

Price overview

• Sterling today: The pound rose 0.2% against the dollar to $1.3450, the highest level in a week, from the session opening at $1.3426, while recording a low at $1.3410.

• On Monday, sterling gained about 0.35% against the dollar, marking its first gain in three sessions, after earlier touching a five-week low at $1.3344.

US dollar

The dollar index fell 0.2% on Tuesday, extending losses for a second straight session and hitting a one-week low at 98.84 points, reflecting continued weakness in the US currency against a basket of major and secondary currencies.

Renewed threats by US President Donald Trump to impose tariffs on European allies have revived the so-called “Sell America” trade seen after the Liberation Day tariff announcements in April last year, when US equities, Treasuries, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors’ move away from dollar-denominated assets reflects a loss of confidence in the US administration and rising strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon move to de-escalate these threats, as it has done with previous tariff announcements, securing control over Greenland remains a core national security objective for the current administration.

UK interest rates

• Following the Bank of England’s meeting in December, traders scaled back bets on continued monetary easing and further interest rate cuts.

• Market pricing for a 25-basis-point rate cut by the Bank of England at its February meeting remains steady below 20%.

UK labour market

To reprice these expectations, investors are closely watching key UK labour market data due later today, including unemployment benefit claims for December, the unemployment rate, and average earnings figures for November.

Outlook for sterling

At Economies.com, we expect that if UK labour market data come in stronger than market expectations, the probability of a February rate cut by the Bank of England will decline, potentially driving further gains in sterling.

The Japanese yen rose in Asian trading on Tuesday against a basket of global currencies, moving closer once again to its two-week highs against the US dollar, supported by continued weakness in the US currency amid renewed threats by US President Donald Trump over Greenland.

The yen’s move into positive territory was also underpinned by growing speculation ahead of the first monetary policy meeting of the Bank of Japan this year, which is expected to include an upward revision to economic forecasts, along with possible signals of the central bank’s readiness to continue raising interest rates.

Price overview

• Japanese yen today: The dollar fell by more than 0.2% against the yen to ¥157.85, from the session opening at ¥158.14, while the pair recorded an intraday high at ¥158.28.

• The yen ended Monday’s session down by less than 0.1% against the dollar, due to correction and profit-taking, after earlier touching a two-week high at ¥157.43.

• Beyond profit-taking, the yen retreated after Japanese Prime Minister Sanae Takaichi announced plans to call an early general election in February.

US dollar

The dollar index fell by 0.2% on Tuesday, extending its losses for a second consecutive session and touching a one-week low at 98.84 points, reflecting continued declines in the US currency against a basket of major and secondary currencies.

Renewed threats by Trump to impose tariffs on European allies triggered a repeat of what has become known as the “Sell America” trade, which emerged after the so-called Liberation Day tariffs announced in April last year, when US equities, Treasuries, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors’ move away from dollar-denominated assets reflects a loss of confidence in the US administration and rising strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon move to de-escalate these threats, as it did with previous tariff announcements, securing control over Greenland remains a core national security objective for the current administration.

Bank of Japan

• The Bank of Japan will hold its first monetary policy meeting of 2026 on Thursday and Friday, during which it will review recent economic developments in the world’s fourth-largest economy and determine appropriate policy tools, with markets closely watching its stance on interest rates and yield curve control amid shifting global conditions.

• The Japanese central bank raised interest rates to their highest level in 30 years at 0.75% in December, and is widely expected to keep borrowing costs unchanged at this week’s meeting.

• Sources cited by Reuters said some Bank of Japan policymakers see scope to raise interest rates earlier than markets currently expect, with a strong likelihood of a hike in April, as the weak yen threatens to exacerbate already rising inflationary pressures.

• The sources added that the Bank of Japan is expected to revise up its economic forecasts for fiscal year 2026 and signal its readiness to raise interest rates at the earliest possible opportunity.

Sterling rose on Monday as markets focused on upcoming UK economic data due later this week, while geopolitical concerns were stirred by US President Donald Trump’s threats to impose tariffs on Europe over Greenland.

The pound gained 0.16% to $1.3402, after ending last week down 0.13%.

The euro was little changed against sterling at 86.75 pence.

Kit Juckes, chief FX strategist at Société Générale, said the pound has performed relatively well since the start of the year, but warned that the move may be nearing its limits as fresh economic data comes into focus.

“The idea that the UK economy is doing well is not, I think, clearly priced by anyone,” Juckes said, adding that investors would nevertheless be watching some of the upcoming data with concern.

He added that sterling’s rise against the euro appears to be close to its ceiling, suggesting that the currency may start to lose momentum.

Since the start of the year, sterling has fallen about 0.5% against the dollar, while rising by a similar amount against the euro.

In the days ahead, investors are awaiting UK employment data for November, as well as inflation and retail sales figures for December.

Over the weekend, Trump said additional tariffs of 10% would be imposed from February 1 on goods imported from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, until the United States is allowed to purchase Greenland.

UK Prime Minister Keir Starmer on Monday called for calm discussions over Greenland, while European allies moved quickly to try to avert additional tariffs, even as they prepared possible retaliatory measures.

The US dollar weakened broadly on Monday, as investors shifted funds away from US assets.

Juckes said the geopolitical backdrop is clearly playing a role, though markets are not yet fully immersed in it. He added that while reacting to UK data, sterling would still keep “at least one eye on the wider world.”

That wider focus also includes Trump’s expected appearance at the World Economic Forum in Davos on Wednesday, where investors are expected to scrutinize any remarks made by the US president.