Gold prices rose in European trade on Thursday, resuming gains after a short hiatus and approaching record highs as both the dollar and US yields stalled. 

The gains come before important US data, which will shed light on the health of the US economy in the fourth quarter of the year.

Prices 

Gold prices rose 0.8% today to $2737 an ounce, with a session-low at $2715.

On Wednesday, gold prices lost 1.2%, marking the heftiest loss since August 5, amid active profit-taking away from recent record highs at $2758. 

The Dollar

The dollar index fell 0.3% on Thursday, about to mark the first loss in four days and giving up three-month highs at 104.57 against a basket of major rivals. 

US Yields 

US 10-year treasury yields fell 1.4% on Thursday, giving up three-month highs at 4.192% and boosting non-yielding assets such as gold. 

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in November stood at 93%, while the odds of no change in policies stood at 7%. 

Now investors await important US manufacturing, services, and unemployment claims data for October. 

SPDR

Gold holdings at the SPDR Gold Trust fell 1.44 tons yesterday to a total of 893.8 tonnes, away from an August 14, 2023 high at 895.24 tons. 

The euro rose in European trade on Thursday against a basket of major rivals after a wave of losses across three sessions, with the euro eventually settling above 3-⅕ month lows against the US dollar. 

It comes ahead of major data on the eurozone sectors later today, which would shed important light on the health of the European economy in the final quarter of the year. 

The Price

The EUR/USD pair rose 0.1% today to $1.0793, with a session-low at $1.0778.

The pair closed down 0.15% on Wednesday, marking the third loss in a row, and hitting a 3-⅕ month trough at $1.0761 after beariah remarks by Christine Lagarde.

Lagarde

European Central Bank President Christine Lagarde said on Tuesday that eurozone inflation is on its way down, and could reach the 2% target faster than expected. 

She said the direction of the monetary policy has become clear, however, future interest rate cuts will depend on future data.

The ECB cut interest rates three times this year, and will likely cut it once more before the year-end. 

European Rates

Four sources told Reuters that the ECB will likely cut interest rates once more in December, unless data pointed otherwise.

And after Lagarde’s latest remarks, the odds of an ECB interest rate cut in December rallied from 85% to 95%. 

Interest Rate Gap

The eurozone-US interest rate gap is standing at 160 basis points in favor of the US, the largest since June 2022, which continues to weigh on the common currency. 

The Canadian dollar fell against most major rivals after an aggressive step taken by the Bank of Canada today. 

The Bank of Canada today announced an interest rate cut of 50 basis points to 3.75% as expected.

The BOC expects the global economy to expand by 3% in the next two years, and for the US economic growth to be better than expected, but Chinese outlook remains weak. 

Inflation has taken a dive in advanced economies in recent months, with global financial conditions improving overall since July as markets anticipate interest rate cuts.

Global oil prices were $10 lower than expected in the BOC’s July report. 

In Canada, the economy grew by 2% in the first half of the year, and the bank expects a 1.75% growth rate in the second half. 

The BOC also expects the opening of the Trans Mountain Expansion pipeline to boost exports, however, the labor market remains weak, with unemployment at 6.5%. 

The bank expects total GDP growth to improve gradually as interest rates fall, with housing investments increasing as well amid strong housing demand and increased spending on renovations. 

The BOC expects a total GDP growth of 1.2% in 2024, and 2.1% in 2025, and 2.3% in 2026.

Canada’s inflation fell from 2.7% in June to 1.6% in September, paving the way for aggressive interest rate cuts by the central bank.

The BOC asserted that future interest rate cuts will be guided by upcoming data and their impact on inflation outlook. 

On trading, the CAD/USD pair fell 0.2% as of 15:55 GMT to 0.7225.

Aussie 

The Australian dollar fell 0.8% against its US counterpart to 0.6631.

US Dollar

The dollar index rose 0.4% as of 14:57 GMT to 104.4, with a session-high at 104.5, and a low at 104.09.

It comes as US two-year treasury yields fell by 3 basis points to 4.065%.

US 10-year treasury yields on the other hand rose by 5 basis points to 4.256%, as 30-year treasury yields rose by 3.5% to 4.53%. 

The Bank of Canada today announced an interest rate cut of 50 basis points to 3.75% as expected.

The BOC expects the global economy to expand by a yearly 3% rate in the next two years, and for the US economic growth to be better than expected, but Chinese outlook remains weak. 

Inflation has taken a dive in advanced economies in recent months, with global financial conditions improving overall since July as markets anticipate interest rate cuts.

Global oil prices were $10 lower than expected in the BOC’s July report. 

In Canada, the economy grew by 2% in the first half of the year, and the bank expects a 1.75% growth rate in the second half. 

The BOC also expects the opening of the Trans Mountain Expansion pipeline to boost exports, however, the labor market remains weak, with unemployment at 6.5%. 

The bank expects total GDP growth to improve gradually as interest rates fall, with housing investments increasing as well amid strong housing demand and increased spending on renovations. 

The BOC expects a total GDP growth of 1.2% in 2024, and 2.1% in 2025, and 2.3% in 2026.

Canada’s inflation fell from 2.7% in June to 1.6% in September, paving the way for aggressive interest rate cuts by the central bank.

The BOC asserted that future interest rate cuts will be guided by upcoming data and their impact on inflation outlook.