Gold climbs above $4,050 as Fed rate decision nears

• At nearly $4,065, Gold is trading 1.15% higher on the day in Wednesday’s early Asian session.
• Easing inflation concerns as oil prices soften lend support to Gold.
• Attention will shift to the Fed’s policy meeting later on Wednesday.

Around $4,065 is where Gold (XAU/USD) trades early in Wednesday’s Asian session, having risen sharply as weaker oil prices provide support. With the Federal Reserve's (Fed) policy meeting due later on Wednesday, traders are looking for indications of the future course of US interest rates.

With the focus shifting to Middle East peace talks, crude oil prices are declining for a second successive day. Renewed signs of tension in the US-Iran and Houthi-Saudi Arabia conflicts could, however, lift energy prices and intensify inflation concerns. The resulting pressure on central banks to tighten monetary policy could weigh on the yellow metal.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said: "Softer oil prices will probably provide some lift for gold because it relieves the inflation worries and arguably moderates Fed hawkishness to some degree,"

At the close of its October policy meeting, the US central bank is expected to keep interest rates on hold. Its decision, due later in the day, will be the main focus for markets.

Only a 6.6% probability of a Fed rate rise on Wednesday is now priced into markets. Nonetheless, high energy prices continue to underpin expectations of an increase before year-end, with the probability of a December US rate rise at 84.4%. As rates rise, so does the opportunity cost of owning gold, which pays no yield.

Thursday brings the US Personal Consumption Expenditures (PCE) figures, which traders will scrutinise closely. This is the inflation measure the Fed follows most closely in pursuing its 2% target.

Gold looks vulnerable as copper recovers, crude consolidates and equities diverge

Across commodities and risk assets, Scotiabank strategists see an uneven picture. While “gold appears increasingly vulnerable as it attempts to hold on to the psychologically important $4000/oz level.”, they observe that “copper is tentatively extending its recovery from the lower end of its flat range,” Their assessment is that “easing geopolitical concerns (US/Iran, Russia/Ukraine) remain a major risk for precious metals and the continued decline in silver leaves the balance clearly tilted to the downside.”

Turning to energy, Scotiabank notes that “the price(s) of crude look to have settled into tight consolidation ranges with WTI steady just above $100/bbl and Brent above $115/bbl.” For equities, the strategists report that “global equity indices have been mixed however, with notable weakness in China’s CSI offering a stark contrast to the 3% gain in the Kospi,” and add that “performance across European bourses has been generally soft.”

Warsh highlights investment growth and AI risks while withholding policy commitments

A 5.6/10 reading on the FXS Speechtracker puts Fed Chair Warsh’s speech modestly below the historical average of 6.1/10. The score captures a cautious tone, notwithstanding positive references to structural growth and a surge in investment. A pronounced emphasis on risk management is evident in the admission of being “over-scarred from the global financial crisis”. At the same time, Warsh points to policy-driven investment strength but declines to prejudge forthcoming FOMC decisions, leaving Dollar traders focused on outcomes that depend on the data. By presenting AI both as a source of demand and as a means of strengthening confidence in monetary policy data, Warsh gives the Fed’s reaction function a nuanced, forward-looking dimension. Clear guidance on the near-term implications for employment is absent, however.

At a still-elevated 127.51, the FXS Fed Sentiment Index recorded a move of 0.00 points and remained unchanged. Despite the slightly softer FXS Speechtracker reading, this suggests that the wider policy narrative remains firmly hawkish. The index is well above its neutral 100 level, so markets are likely to view Warsh’s investment optimism, focus on AI and crisis-shaped caution as compatible with a Fed still inclined to hold or tighten policy, rather than turn dovish.

Technical Analysis: Gold retains a near-term bearish bias

Trading beneath both the 20-day Moving Average, which forms the middle Bollinger band, and the 100-day Moving Average leaves XAU/USD with a bearish near-term bias on the daily chart. Together, these averages constrain the upside and indicate that the broader uptrend is losing momentum. Gold also remains well below the upper Bollinger band, showing how far the market has pulled back from earlier extremes. Meanwhile, a Relative Strength Index (14) reading of 41 carries a mildly negative bias, suggesting that selling pressure continues to prevail during rebounds.

Near $4,125, the 20-day simple Bollinger midline provides the first resistance level. Further barriers lie at the 100-day Moving Average around $4,220 and the upper Bollinger band at $4,235; a break above the latter would be required to restore a stronger bullish tone. Immediate support sits at the lower Bollinger band of $4,015. A daily close beneath it would leave scope for a deeper correction, whereas remaining above it would characterise the XAU/USD decline as a consolidative pullback rather than an outright trend reversal.

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