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

• Gold gains 1.15% on the day to trade near $4,065 in early Asian trading on Wednesday.
• Gold draws support as lower oil prices alleviate some concerns over inflation.
• Market attention will shift to the Fed’s policy meeting later on Wednesday.

Gold price (XAU/USD) advances to around $4,065 in Wednesday’s early Asian session as declining oil prices lend support. With the Federal Reserve's (Fed) policy meeting scheduled for later on Wednesday, traders are looking for indications of the direction of US interest rates.

The focus on Middle East peace talks has pushed crude oil prices lower for a second straight day. Any indication of fresh tensions in the US-Iran and Houthi-Saudi Arabia conflicts, however, could lift energy prices and rekindle inflation worries. Gold could then face pressure, as those concerns could strengthen the case for central banks to tighten monetary policy.

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,"

The Fed’s interest rate announcement later in the day will be the key focus for markets. At the close of its October policy meeting, the US central bank is expected to keep rates on hold.

Although high energy prices continue to fuel expectations of a rate increase before year-end, markets currently assign just a 6.6% probability to a Fed hike on Wednesday. For December, the probability of a US rate hike is 84.4%. As gold pays no yield, higher interest rates raise the opportunity cost of holding it.

Thursday’s US Personal Consumption Expenditures (PCE) release will also be closely tracked by traders. This is the inflation gauge the Fed monitors most closely in pursuing its 2% target.

Why is gold vulnerable as copper recovers, crude consolidates and equities diverge?

Across commodities and risk assets, Scotiabank strategists describe an uneven market backdrop. While “copper is tentatively extending its recovery from the lower end of its flat range,” they observe that “gold appears increasingly vulnerable as it attempts to hold on to the psychologically important $4000/oz level.” 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.” Its assessment of equities is 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,” alongside the observation that “performance across European bourses has been generally soft.”

What do Warsh’s investment and AI remarks signal without a policy commitment?

A cautious tone in Fed Chair Warsh’s speech, despite positive references to structural growth and surging investment, puts its FXS Speechtracker score at 5.6/10, modestly below the historical average of 6.1/10. His acknowledgement of being “over-scarred from the global financial crisis” points to a strong emphasis on risk management. At the same time, Warsh stresses the strength of policy-led investment but declines to prejudge forthcoming FOMC decisions, leaving Dollar traders focused on outcomes driven by incoming data. By highlighting AI both as a source of demand and as a means of improving confidence in monetary policy data, he brings a nuanced, forward-looking element to the Fed’s reaction function. His remarks nevertheless offer no clear direction on the near-term effect on employment.

Despite the slightly softer FXS Speechtracker reading, the broader policy message remains firmly hawkish: the FXS Fed Sentiment Index registered a 0.00-point change, holding at an elevated 127.51. That reading remains well above the neutral 100 level. Markets are therefore likely to view Warsh’s optimism on investment, focus on AI and crisis-shaped caution as consistent with a Fed inclined to maintain or tighten policy, rather than turn dovish.

Gold Technical Analysis: Can Support Hold?

A bearish near-term outlook persists for XAU/USD on the daily chart. The price remains below both the 20-day Moving Average, which forms the middle Bollinger band, and the 100-day Moving Average. Together, these indicators constrain the upside and suggest that the broader uptrend is losing momentum. Trading well below the upper Bollinger band also indicates a retreat from earlier extremes. Meanwhile, a Relative Strength Index (14) reading of 41 carries a slightly negative bias, suggesting that selling pressure continues to prevail during rebounds.

The first upside hurdle is the 20-day simple Bollinger midline near $4,125. Beyond that lie 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 outlook. Immediate downside support comes from the lower Bollinger band at $4,015. A daily close beneath it would create scope for a deeper correction. Holding above that band, by contrast, would keep the XAU/USD decline within a consolidative pullback rather than signal a complete trend reversal.

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