Near $4,050: Gold retreats after Fed holds rates as markets await US PCE data

• $4,050 is gold’s approximate level after a decline in early Asian trading on Thursday.
• With interest rates unchanged, the Fed reaffirmed its resolve to curb inflation.
• Thursday’s US September PCE inflation release is the next catalyst traders are watching.

$4,050 is the approximate price of Gold (XAU/USD) after a modest retreat. In Thursday’s early Asian session, investors are weighing remarks by Federal Reserve (Fed) Chair Kevin Warsh following the US central bank’s decision to keep benchmark interest rates unchanged at its October policy meeting.

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

At his 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,”

Bloomberg reported that traders retained their bets on a December Fed rate rise but scaled back expectations for further increases in 2027. Three additional hikes in this cycle are no longer fully priced into futures markets. For non-yielding gold, higher interest rates raise the opportunity cost of ownership.

Later on Thursday, attention turns to September’s US Personal Consumption Expenditures (PCE) inflation figures. The release could provide clues to the direction of monetary policy.

Gold recovery: FOMC and core PCE present next test

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

For OCBC, the next key event is the policy meeting: “focus now shifts to the FOMC, where a hold is widely anticipated, but guidance on path trajectory will matter more.” The strategists note that “Thursday’s core PCE could either reinforce or temper the Fed’s message,” while “further easing in oil prices, accompanied by softer yields and USD, could help extend gold’s recovery.” Their warning is that “a hawkish Fed or another bout of equity deleveraging could quickly undermine the rebound,” leaving their assessment that “for now, we still see some 2-way risks.”

2% inflation goal: Fed resolve and ‘monetary medicine’ support Dollar

A 7/10 FXS Speechtracker score places Warsh’s press conference in line with the historical average and the established baseline, although his language is more confidently hawkish. His insistence on a firm 2% PCE target, and the message that “ensuring price stability is not about a fixed date on a calendar”, point to a resolute anti-inflation stance guided by the data. That reading is reinforced by claims that “new monetary medicine” is working and inflation expectations are “going the right way,” arguing against an imminent shift towards easing. Discussion of tighter financial conditions, wider credit spreads and broadening capital expenditure suggests policy is having an effect, but is not yet restrictive enough to declare success. This combination typically supports the Dollar on pullbacks.

A 14.39-point rise took the FXS Fed Sentiment Index to 141.89, further into hawkish territory and comfortably above the neutral threshold of 100. The move confirms that markets interpreted the press conference as showing greater determination to tackle inflation. Alongside a steady FXS Speechtracker reading of 7/10, the elevated index suggests the Fed’s reaction function remains tilted towards maintaining tight policy for longer. That setting should keep favouring the Dollar over lower-yielding currencies.

100-day SMA caps Gold: Technical Analysis

Below its key moving averages, XAU/USD remains in a corrective phase on the daily chart, leaving the short-term outlook bearish. Spot gold trades beneath both the 20-day Bollinger simple moving average and the 100-day simple moving average. This indicates that rebounds are still constrained within a wider consolidation following the recent decline. Near 40, the Relative Strength Index (14) signals persistent downward pressure without reaching oversold territory. Sellers therefore appear to retain the upper hand, with scope for further losses.

Near $4,120, the 20-day Bollinger middle band provides the first resistance. A break higher would bring the 100-day SMA at $4,218 into view, followed by the upper Bollinger band around $4,235, where selling interest could return. Initial support sits at $4,005, the lower Bollinger band. A decisive breach would likely strengthen the bearish outlook and clear a path towards lower psychological and historical levels that are not visible in the current chart configuration.

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