Gold retreats towards $4,050 following Fed rate hold as markets await US PCE data

• Near $4,050, Gold trades lower in early Asian dealing on Thursday.
• With interest rates left unchanged, the Fed reaffirmed its resolve to curb inflation.
• Thursday’s US September PCE inflation release is in focus as traders look for a fresh catalyst.

Following the Federal Reserve’s (Fed) decision to keep benchmark interest rates unchanged at its October policy meeting, markets are weighing remarks from Chair Kevin Warsh. Gold (XAU/USD) is edging down towards $4,050 in Thursday’s early Asian session.

At 3.75% to 4.00%, the benchmark federal funds rate range was left unchanged by the Fed. In the accompanying statement, policymakers expressed hope that forthcoming data would guide their next decision.

Speaking at a press conference, Fed Chairman Kevin Warsh said officials have “made clear our readiness to act as circumstances require, and we have shown our willingness to act.”

Warsh said: “It’s our responsibility to get inflation down,” adding: “That’s the reason the FOMC’s discussion over the last couple of days focused mainly on the price stability side of our remit,”

According to Bloomberg, traders continued to bet on a December rate rise but scaled back expectations for further increases in 2027. Three additional rises in this cycle are no longer fully reflected in futures pricing. As gold pays no yield, higher interest rates raise the opportunity cost of holding it.

Due later on Thursday, September’s US Personal Consumption Expenditures (PCE) inflation figures will be the main focus. The release could shed light on the direction of monetary policy.

Gold’s recovery faces scrutiny from FOMC guidance and core PCE

OCBC strategists characterise gold’s latest recovery as “somewhat encouraging”, observing that it has taken place “particularly given the firmer USD and US Treasury yield upticks.” They also suggest that “a rebound in technology equities may also have helped ease broader liquidation pressures,” while noting that “US Treasury yields remain elevated and markets continue to price a high probability of another Fed hike in December.”

OCBC says that “focus now shifts to the FOMC, where a hold is widely anticipated, but guidance on path trajectory will matter more.” Against that backdrop, the strategists note that “Thursday’s core PCE could either reinforce or temper the Fed’s message,” and suggest that “further easing in oil prices, accompanied by softer yields and USD, could help extend gold’s recovery.” Their caution is that “a hawkish Fed or another bout of equity deleveraging could quickly undermine the rebound,” with the conclusion that “for now, we still see some 2-way risks.”

Dollar stays supported as Fed reaffirms 2% target and sees ‘monetary medicine’ taking effect

A 7/10 FXS Speechtracker reading, in line with the historical average, places Warsh’s press conference firmly within the established baseline, although his language conveys greater hawkish conviction. By stressing that “ensuring price stability is not about a fixed date on a calendar” and maintaining a firm 2% PCE target, he signals a data-dependent yet determined stance against inflation. Claims that “new monetary medicine” is taking effect and inflation expectations are “going the right way,” reinforce that message, arguing against an imminent shift towards easing. His references to tighter financial conditions, wider credit spreads and broadening capital expenditure suggest that policy is having an effect, but is not yet restrictive enough to declare success. That combination tends to support the Dollar when it dips.

After a 14.39-point rise to 141.89, the FXS Fed Sentiment Index moved further into hawkish territory, comfortably above the neutral 100 line. The increase confirms that markets interpreted the press conference as signalling greater resolve on inflation than previously. Together, the elevated index and unchanged 7/10 FXS Speechtracker reading suggest that the Fed’s reaction function remains tilted towards maintaining tight policy for longer. This setting should keep the Dollar supported against lower-yielding currencies.

Technical Analysis: Gold stays below the 100-day SMA as recovery attempts falter

Below its key moving averages on the daily chart, XAU/USD remains in a corrective phase, leaving the near-term outlook bearish. Spot gold trades beneath both the 20-day Bollinger simple moving average and the 100-day simple moving average. This suggests that, following the recent retreat, rallies remain constrained within a wider consolidation. With the Relative Strength Index (14) close to 40, downward pressure persists without conditions yet becoming oversold. Sellers therefore appear to retain the upper hand, with scope for further losses.

The first upside hurdle is the middle band of the 20-day Bollinger Bands, near $4,120. A move above it would bring the 100-day SMA at $4,218 into view, followed by the upper Bollinger band around $4,235, where selling could resume. Initial downside support lies at the lower Bollinger band of $4,005. A decisive break below that level would likely strengthen the bearish outlook, paving the way for a deeper fall towards lower psychological and historical levels that are not shown in the current chart configuration.

(The technical analysis of this story was written with the help of an AI tool. Know more.)