Introduction to Gold Prices
Gold prices have been experiencing a decline in the European market, marking the second consecutive session of losses. The current price of gold is nearing a loss of trading above $4,400 per ounce. This decline can be attributed to the continued strength of the US dollar in the foreign exchange market.
Market Expectations
The US monthly jobs report, scheduled for release on Friday, is highly anticipated as it is expected to provide strong signals on the Federal Reserve’s monetary policy path and the outlook for US interest rates throughout the year. The report will play a significant role in shaping the future of gold prices.
Price Overview
Gold prices today have declined by 0.9% to $4,415.79, from the session opening level at $4,456.33, after recording a high of $4,466.48. This decline follows a loss of around 0.9% at Wednesday’s settlement, marking the first loss in four sessions. Earlier, gold had touched a one-week high at $4,500.45 per ounce.
US Dollar Influence
The US dollar index has risen by 0.15% on Thursday, maintaining gains for the third consecutive session and nearing a four-week high. This reflects the continued strength of the US currency against a basket of major and minor currencies. The strength of the US dollar has a direct impact on gold prices, as a stronger dollar makes gold more expensive for foreign buyers, leading to a decrease in demand and subsequently, a decline in prices.
US Services Sector Activity
Data released on Wednesday showed an unexpected rebound in US services sector activity in December, indicating that the US economy ended 2025 on solid footing. This data may give the Federal Reserve more time to assess its next step toward further interest rate cuts. However, these data reduced expectations that the Federal Reserve will cut interest rates when it meets later this month.
US Interest Rates
Federal Reserve Governor Steven Miran has stated that a sharp cut in US interest rates is needed to sustain economic growth. On the other hand, Minneapolis Federal Reserve President Neel Kashkari sees a risk of a sharp rise in the unemployment rate. According to CME’s FedWatch tool, market pricing shows an 88% probability of leaving US interest rates unchanged at the January 2026 meeting, with a 12% probability of a 25-basis-point rate cut.
Interest Rate Projections
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. The upcoming US jobs report for December will play a crucial role in reassessing these expectations, as the Federal Reserve heavily relies on this data when determining the monetary policy path.
Gold Outlook
Traders are balancing rising geopolitical tensions against incoming US macroeconomic signals. Weaker labor market data has strengthened expectations for further Federal Reserve rate cuts, which supports non-yielding precious metals such as gold. However, sentiment remains balanced as investors remain mindful of elevated volatility and the risk of profit-taking at high price levels.
SPDR Gold Trust
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged yesterday, with total holdings steady at 1,067.13 metric tons. This stability in gold holdings indicates a steady demand for gold, despite the current decline in prices.
Conclusion
In conclusion, the decline in gold prices can be attributed to the strength of the US dollar and the expectations surrounding the US monthly jobs report. The upcoming report will play a significant role in shaping the future of gold prices, as it will provide insights into the Federal Reserve’s monetary policy path and the outlook for US interest rates. As traders continue to balance geopolitical tensions and macroeconomic signals, the demand for gold remains steady, indicating a potential for future growth in gold prices.
