Gold prices rose in the European market on Wednesday, attempting to recover from a three-week low recorded earlier in Asian trading, supported by bargain hunting at lower levels.

However, the recovery remains capped by strength in the US dollar, which is being bought as the preferred safe-haven investment ahead of the release of the Federal Reserve’s latest meeting minutes.

The Price

•Spot gold rose 0.35% to $3,327.65, up from the session’s opening level of $3,315.84, after touching an intraday low of $3,311.58, the weakest level since August 1.

•At Tuesday’s settlement, gold lost 0.5%, marking its second straight daily decline under pressure from a stronger US dollar and higher US bond yields.

The US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session and reaching a one-week high of 98.44, reflecting continued strength in the US currency against a basket of major and minor counterparts.

Markets now turn their attention to Fed Chair Jerome Powell’s speech on Friday at Jackson Hole, where traders are looking for any pushback against market pricing of a rate cut next month.

US Interest Rates

•According to CME’s FedWatch Tool, the probability of a 25 basis-point rate cut in September is currently priced at 83%, with a 17% chance of no change.

•For October, probabilities are priced at 92% for a 25 basis-point cut and 8% for no change.

•Investors are closely watching the Fed minutes due later today and comments from policymakers to reassess these expectations, alongside Powell’s upcoming remarks at Jackson Hole.

Gold Outlook

Kelvin Wong, market analyst at OANDA for Asia-Pacific, said the stronger US dollar and improved risk appetite following recent geopolitical developments are weighing on gold, with markets awaiting Powell’s remarks at Jackson Hole for further direction.

SPDR Gold Trust

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.16 metric tons on Tuesday, bringing the total down to 962.21 metric tons. This compares with 965.37 metric tons, the highest level since September 9, 2022.

The UK economy released its annual headline CPI on Wednesday, showing a rise of 3.8% in July, the fastest pace since January 2024. This came in above market expectations of a 3.7% increase, and also higher than the previous reading of 3.6%.

The annual core CPI also rose 3.8%, exceeding both market expectations of 3.7% and the prior reading of 3.7%.

These figures highlight the continued divergence of prices from the Bank of England’s 2% medium-term inflation target, reflecting persistent inflationary pressures on policymakers and reducing the likelihood of a rate cut in September.

•This release is “positive” for the British pound.

The British pound declined in European trading on Wednesday against a basket of major currencies, deepening losses for the third consecutive session against the US dollar and hitting a one-week low. The drop came amid continued strength in the greenback ahead of the annual Jackson Hole Economic Symposium.

Expectations for a September rate cut by the Bank of England have eased following the central bank’s latest policy meeting and a run of strong UK economic data. Investors are now awaiting the release of July inflation figures later today to reassess the outlook.

Price Overview

• The pound fell more than 0.2% against the dollar to $1.3462, its lowest level since August 12, from an opening price of $1.3492, after touching a session high at $1.3493.

• On Tuesday, the pound lost 0.1% against the dollar in a second straight daily decline, driven by renewed demand for the US currency as a safe-haven asset.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session to hit a one-week high of 98.44, reflecting persistent strength in the US currency against a basket of majors and minors. Markets remain focused on Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, which could shape expectations for a potential rate cut next month.

UK Interest Rates

• Following last week’s hawkish Bank of England meeting, traders pared back bets on rate cuts, now pricing in an additional 17 basis points of easing this year.

• Current pricing for a 25-basis-point cut at the September meeting stands below 20%.

UK Inflation Data

Later today, investors await key UK inflation readings for July, which are expected to heavily influence the Bank of England’s policy path. The headline CPI is forecast to rise 3.7% year-on-year, slightly up from 3.6% in June, while core CPI is expected to remain steady at 3.7%.

Outlook for the Pound

We at Economies.com expect that if UK inflation prints above market forecasts, expectations for a September BoE rate cut will diminish, supporting a recovery in the pound.

The New Zealand dollar fell broadly in Asian markets on Wednesday against a basket of major and minor currencies, extending losses for the second consecutive day against its US counterpart and hitting a four-month low. The decline came amid accelerating open-market selling following the release of the Reserve Bank of New Zealand’s monetary policy decision.

The RBNZ cut interest rates by 25 basis points to 3.0%, the lowest level since August 2022, and signaled further easing if inflationary pressures continue to decline in line with its forecasts.

When deciding on the 25-basis-point cut, in line with most market expectations, the RBNZ Board also considered a larger 50-basis-point reduction.

Price Overview

• The New Zealand dollar fell against the US dollar by around 1.25% to 0.5820, its lowest level since April 14, down from the opening price of 0.5893, after recording a high of 0.5899 earlier in the session.

• On Tuesday, the New Zealand dollar ended trading down by about 0.5% against the US dollar, its first loss in three days, as the greenback strengthened against most major and minor currencies.

Reserve Bank of New Zealand

As expected, the RBNZ cut its benchmark interest rate by 25 basis points to 3.00% on Wednesday, the lowest since August 2022. This marked the seventh rate cut since the start of the easing cycle a year ago.

The RBNZ has now lowered rates by a total of 250 basis points since August 2024, citing slowing inflation within its medium-term 2–3% target, weakening economic activity, and a softer labor market.

Today’s decision was approved by a majority of the Monetary Policy Committee, with four members voting for the 25-basis-point cut and two voting for a bolder 50-basis-point reduction.

The central bank said that if inflation continues to decline as expected over the medium term, the committee foresees additional rate cuts.

It also noted both upside and downside risks to the outlook. Cautious behavior by households and businesses could weigh further on growth, while the economy might recover more quickly as the full effects of rate cuts take hold.

New Zealand Interest Rates

• Following the RBNZ meeting, markets priced in more than a 50% chance of a 25-basis-point cut at the October 8 meeting, and above 95% for November.

• Futures markets now suggest New Zealand rates could fall to 2.5% by year-end.

• Stephen Toplis, Head of Research at Bank of New Zealand, said that given the dovish tone of the statement, the bank now expects 25-basis-point cuts in both October and November.