Gold prices fell in European trade on Wednesday, resuming losses and backing off two-month highs on profit-taking as investors shun big positions before the Fed’s policy decisions later today. 

Analysts widely expected the Fed to maintain interest rates unchanged for the fourth straight meeting as markets await fresh clues on the path ahead for monetary policies this year.

The Price

Gold prices fell 0.5% today to $3370 an ounce, with a session-high at $3400.

On Tuesday, gold rose 0.1% after losing 1.4% in the previous session away from a two-month high at $3451.

The Fed

The Federal Reserve is convening later today to discuss policies, and is widely expected to hold interest rates unchanged at below 4.5% for the fourth straight meeting. 

The Fed will likely also provide important clues on the future path of US interest rates this year amid mounting geopolitical tensions related to Trump’s tariffs.

US Rates

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in June stood at 1%.

The odds of a July rate cut stood at a slightly better 19%.

Now traders expect 50 basis points of Fed rate cuts overall this year, starting with September then October. 

SPDR

Gold holdings at the SPDR Gold Trust rose 4.01 tons yesterday, the fourth increase in a row, to a total of 945.94 tons, the highest since April 29.

UK consumer prices rose 3.4% y/y in May, above estimates of a 3.3% rise, but down from a 3.5% rise in the previous reading.

Core prices rose 3.5% y/y as expected, down from 3.8% in the previous reading. 

Sterling rose in European trade on Wednesday against a basket of major rivals, and held its ground above four-week lows against the dollar, on active short-covering as the US dollar tapers off.

The divisions within the Bank of England on the future path of policy easing hurt the odds of a rate cut this week, with traders now awaiting fresh UK inflation data later today to gather more clues.

The Price

The GBP/USD price rose 0.15% to $1.3447, with a session-low at $1.3421.

The pound lost 1.1% on Tuesday against the dollar, the second loss in three days, and the heftiest since April 25 on strong haven demand on the dollar.

US Dollar

The dollar index fell over 0.15% on Wednesday away from a one-week high against a basket of major rivals.

It fell on profit-taking while investors shun new positions before the Fed’s policy decisions later today.

The Fed is widely expected to maintain rates unchanged at 4.5% for the fourth straight meeting, and will likely provide clues on the future path of monetary policies this year.

UK Rates

The latest Bank of England’s policy meeting in May showed a clear division between members on policy.

The BOE will meet this week to discuss latest developments, especially as the UK government reached milestone trade deals with both the US and the EU.

The current odds of a BOE 0.25% interest rate cut this week stood at below 30%.

Now investors await crucial UK inflation data to gather additional clues, with consumer prices expected up 3.3% y/y in May, down from 3.5% in April, while core prices are expected up 3.5% last month.

The yen rose in Asian trade on Wednesday away from a one-week low against the US dollar, as investors shun new bullish positions on the dollar before the Federal Reserve’s policy decisions later today.

Following a cautious meeting by the Bank of Japan this week, the odds of a Japanese rate hike in July tanked with traders awaiting more data to gather additional clues.

The Price

The USD/JPY price fell 0.15% today to 145.04, with a week high at 145.44.

The yen lost 0.4% on Tuesday against the dollar, marking the third loss in a row amid mounting geopolitical tensions in the Middle East.

US Dollar

The dollar index fell over 0.15% on Wednesday away from a one-week high against a basket of major rivals.

It fell on profit-taking while investors shun new positions before the Fed’s policy decisions later today.

The Fed is widely expected to maintain rates unchanged at 4.5% for the fourth straight meeting, and will likely provide clues on the future path of monetary policies this year.

Japanese Rates

As expected, the Bank  of Japan voted to hold interest rates unchanged at 0.5% at this week’s meeting, already the highest since 200.

The vote to maintain rates was unanimous by all nine members of the Bank of Japan’s governing board. 

The BOJ didn’t enact any changes to its gradual reduction of government purchases, amounting to a 400 billion yen cut every quarter until March 2026.

Starting April 2026, the BOJ will cut its bond purchases by 200 billion yen a quarter, with an aim at reducing the bank’s government bond holdings by 16-17% by March 2027 compared to June 2024.

The BOJ asserted it’ll keep raising interest rates if inflation and economic outlook holds steady.

The bank warned against ongoing economic risks, especially the impact  of global tariffs on the economy and inflation, with the bank standing ready to intervene in case long-term interest rates rose too quickly.

The current odds of a 0.25% BOJ interest rate hike in July fell to below 25%.

Now traders await fresh Japanese data on inflation, wages, and unemployment to gather more clues.