【TMGM Financial Recap】Dollar Weakens as Fed Keeps Rates Unchanged: Will US GDP and PCE Data Take Centre Stage as Oil Prices Revive Inflation Concerns?

Gold’s near-term outlook remains uncertain as competing market forces leave neither side firmly in control. Wednesday’s rebound in volatile trading suggested a modest advantage for bulls, but prices slipped again on Thursday. A fall in the US Dollar Index after the Federal Reserve left rates unchanged is lending support, although renewed oil price gains, lingering inflation worries and heightened expectations of a December rate hike are countering that benefit. US third-quarter GDP and September PCE figures are due during this trading session. With market expectations relatively upbeat, gold could face pressure ahead of the releases. Investors should also track how markets continue to interpret the Fed’s decision.  

The Federal Reserve left its benchmark interest rate target range unchanged at 3.75%–4.00% on Wednesday, in line with widespread expectations. Policymakers voted 10–2 to postpone any change in borrowing costs until after next week’s US midterm elections, allowing time for additional evidence on inflation trends.  

There was little in the policy statement to suggest a dovish stance. While acknowledging that inflation remained elevated, the Fed upgraded its description of economic activity from the solid expansion cited at its September meeting to strong growth. Investment also remained strong, it said, with employment growth matching the expansion in the labour force. Compared with September, the language represented a notable shift and introduced an element of forward guidance—something Fed Chair Warsh had previously said he wished to avoid. With Warsh making no pledge to end rate hikes and longer-term US Treasury yields continuing to climb, gold’s scope for gains remained firmly constrained.  

A steeper yield curve was accompanied by a decline in the dollar from its pre-meeting levels. That offers gold near-term support by making the dollar-priced metal less expensive for buyers holding other currencies. Yet beyond the immediate influence of the Fed and the dollar, oil prices are acting as a less visible cap on gold. An attack on a refinery in Saudi Arabia on Wednesday revived fears of supply risks linked to the Middle East conflict. With geopolitical risks compounded by supply disruptions, oil prices have again become a key factor in inflation-driven trading.  

Attention is now on US PCE inflation data, scheduled for rel

ease on Thursday, as investors seek greater clarity on the monetary policy outlook. The Fed uses PCE as its preferred measure of inflation. Should the reading exceed expectations, bets on a December rate hike could strengthen again, lifting Treasury yields and the dollar and putting pressure on gold. A below-forecast figure, by contrast, could offer gold some short-term relief as dollar weakness and reduced rate hike expectations reinforce each other.  

Market Insight: What Could Determine Gold’s Direction?

Although gold continues to find support, the forces helping and hindering it are both substantial. The risk-reward balance of chasing further upside is becoming less appealing, with prices repeatedly fluctuating around $4,000. Near-term gains may remain constrained, though a steep sell-off also looks unlikely. More conclusive signals from inflation figures and central banks will be needed before a clearer direction emerges.