Gold prices rose in the European market on Tuesday in an attempt to recoup some of the losses from the previous session, as the market absorbed US President Donald Trump’s decision not to impose tariffs on imported gold bullion.

These gains were limited, however, by the continued rise of the US dollar in the foreign exchange market ahead of the release of key US inflation data, which is expected to provide fresh pricing for the likelihood of US interest rate cuts later this year.

Price Overview

• Gold prices today: Gold rose by about 0.5% to $3,358.23, from the opening level of $3,342.55, and recorded a low of $3,342.32.

• At Monday’s settlement, gold prices lost 1.6%, marking the first decline in three weeks, as correction and profit-taking accelerated from the two-week high of $3,409.10 per ounce.

• Beyond profit-taking, gold recorded its biggest daily loss since May 14, pressured by the rise in the dollar and the denial of tariffs on bullion.

Tariffs on Gold Bullion

President Donald Trump stated on Monday that no tariffs would be imposed on imported gold bullion, easing market tensions.

US gold futures for December delivery hit an all-time high late last week after the Financial Times reported that the United States had imposed tariffs on one-kilogram gold imports, citing a letter from US Customs and Border Protection.

US Dollar

The US Dollar Index rose on Tuesday by less than 0.1%, maintaining gains for the third consecutive day, reflecting continued strength in the US currency against a basket of global currencies.

President Trump extended the suspension of tariffs on goods and products imported from China for an additional 90 days, until early November, in a move aimed at easing trade tensions between Washington and Beijing.

As the US and China work toward a new trade agreement, a US official told Reuters that chipmakers Nvidia and AMD had agreed to allocate 15% of their China sales revenue to the US government to secure export licenses for semiconductors.

US Interest Rates

• According to CME Group’s FedWatch Tool: the probability of a 25-basis-point US interest rate cut at the September meeting is currently priced at around 85%, with a 15% probability of rates remaining unchanged.

• The probability of a 25-basis-point cut at the October meeting is currently at 94%, with a 6% probability of no change.

US Inflation Data

To reprice the above probabilities, traders are awaiting the release later today of key US inflation data for July, which is expected to have a significant impact on the Federal Reserve’s monetary policy path.

At 13:30 GMT, the headline Consumer Price Index is expected to rise by 2.8% year-on-year in July, up from a 2.7% increase in June, while the core CPI is expected to rise by 3.0% year-on-year, compared with a 2.9% increase the previous month.

Outlook for Gold

• Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Market participants will now definitely focus on the upcoming rate cut from the Federal Reserve, which is almost fully priced in for September.”

• Wong added: “If we start to see core CPI data coming in slightly below expectations, it could further support expectations for a rate cut, which may reduce the cost of holding gold and support higher prices.”

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by about 4.58 metric tons on Monday, marking the third consecutive daily increase, bringing the total to 964.22 metric tons — the highest since September 12, 2022.

The British pound fell in the European market on Tuesday against a basket of global currencies, extending its losses for a second consecutive day against the US dollar and moving away from a three-week high, as correction and profit-taking continued, alongside risk aversion ahead of the UK labor market data release.

The US currency continues to trade in positive territory after the extension of the US-China trade truce for 90 days and ahead of key July inflation data from the world’s largest economy.

Price Overview

• The pound fell against the dollar by 0.1% to $1.3424, from an opening level of $1.3434, recording a high of $1.3440.

• On Monday, the pound lost 0.15% against the dollar, marking its first daily loss in the past seven sessions, due to correction and profit-taking after hitting an earlier three-week high of $1.3477.

UK Interest Rates

• Following last week’s hawkish Bank of England meeting, traders reduced their bets on rate cuts, now expecting an additional 17 basis points of easing this year.

• The probability of a 25 basis point BoE rate cut in the September meeting is currently priced below 25%.

UK Labor Market

The upcoming UK labor market report, due later today, is equally important for the pound as it is expected to provide more signs of a slowdown in the jobs market.

There are ongoing indications that Rachel Reeves’ jobs tax is weighing on the labor market, likely leading to more job losses.

Traders are also facing challenges with unreliable UK labor market survey data, as some survey components are now deemed inaccurate.

A weak jobs report would further support the case for the Bank of England that the economic downturn is unfolding, warranting additional interest rate cuts.

With forex markets once again focusing on relative interest rates, an acceleration in BoE rate cuts would weigh on the pound.

US Dollar

The US dollar index rose slightly by less than 0.1% on Tuesday, maintaining its gains for the third consecutive day, reflecting continued strength of the US currency against a basket of major peers.

President Donald Trump extended the suspension of tariffs on Chinese imports for another 90 days until early November, in a move aimed at easing trade tensions between Washington and Beijing, reducing uncertainty and supporting investor risk appetite.

As the US and China work toward a new trade deal, a US official told Reuters that Nvidia and AMD agreed to allocate 15% of Chinese sales revenue to the US government to secure semiconductor export licenses.

According to the CME Group’s FedWatch tool, markets currently price an 85% probability of a 25 basis point rate cut by the Federal Reserve in September, with a 15% chance of no change.

Investors later today await key US July inflation data, which will reveal the extent to which higher tariffs have impacted prices and how much inflationary pressure policymakers at the Fed are facing.

Pound Outlook

We here at Economies.com expect that if UK labor market data is less aggressive than markets anticipate, the likelihood of a September BoE rate cut will rise, leading to further declines in the pound.

At the conclusion of its August 12 meeting, the Reserve Bank of Australia’s Monetary Policy Committee decided on Tuesday morning to cut interest rates by 25 basis points to a range of 3.60%, the lowest level since April 2023, in line with market expectations.

The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, extending losses for a third consecutive day versus the US dollar and hitting its lowest level in two weeks. The decline comes amid weak expectations that the Bank of Japan will raise interest rates in September.

The US currency continued to trade in positive territory after the 90-day extension of the trade truce between the United States and China, ahead of key inflation data for July in the world’s largest economy.

The Price

• USD/JPY exchange rate today: The dollar rose 0.2% to ¥148.43 — the highest since August 1 — from an opening price of ¥148.14, with a session low of ¥147.99.

• The yen ended Monday’s session down 0.3% against the dollar, marking a second straight daily loss, pressured by a rise in US 10-year Treasury yields.

Japanese Interest Rates

• Minutes from the Bank of Japan’s June policy meeting showed some board members said the central bank would consider resuming rate hikes if trade tensions eased.

• Market pricing for a quarter-point rate increase at the September meeting is steady around 40%.

• Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess those expectations.

US Dollar

The US dollar index rose by less than 0.1% on Tuesday, holding gains for a third straight day, reflecting continued strength against a basket of global currencies.

US President Donald Trump extended the suspension of higher tariffs on Chinese goods and products for another 90 days, until early November, in a move aimed at easing trade tensions between Washington and Beijing. This helped reduce uncertainty and bolstered investor risk appetite in financial markets.

As the US and China work toward a new trade agreement, a US official told Reuters that chipmakers Nvidia and AMD have agreed to allocate 15% of their China sales revenue to the US government in order to secure export licenses for semiconductors.

According to CME Group’s FedWatch tool, markets are currently pricing an 85% chance of a 25-basis-point US interest rate cut in September and a 15% chance of no change.

Investors later today await the release of key US inflation data for July, which will indicate how much the recent tariff increases have affected prices and the extent of inflationary pressures facing Federal Reserve policymakers.

Yen Performance Outlook

At Economies.com, we expect the yen to remain in negative territory against the US dollar, especially if US inflation data comes in hotter than market expectations.