【TMGM Financial Recap】Fed Holds Rates Steady and Dollar Weakens, but Oil Prices Rekindle Inflation Concerns—Focus Turns to US GDP and PCE Data!

On Wednesday, gold rebounded amid choppy trading, with bulls appearing to hold a slight advantage, but prices edged lower again on Thursday. Support from a decline in the US Dollar Index following the Federal Reserve’s decision to hold rates steady is being offset by renewed gains in oil prices, persistent inflation concerns and elevated expectations of a December rate hike. Caught between these opposing forces, gold’s near-term direction remains unclear. Third-quarter GDP and September PCE data from the United States are due this trading session. Relatively optimistic market expectations could also weigh on gold ahead of the releases, while investors should monitor further market interpretations of the Fed’s decision.  

As widely expected, the Federal Reserve on Wednesday maintained its benchmark interest rate target range at 3.75%–4.00%. In a 10–2 vote, policymakers decided to defer any adjustment to borrowing costs until after next week’s US midterm elections while awaiting further data on inflation trends.  

The policy statement itself was hardly dovish. The Fed acknowledged that inflation remained elevated, while upgrading its assessment of the economy from the solid expansion described at its September meeting to strong growth. It also stated that investment remained strong and employment growth was keeping pace with labour force growth. This marked a significant shift in wording from the September meeting and carried an element of forward guidance—an approach Fed Chair Warsh had previously said he wanted to avoid. Warsh offered no commitment to ending rate hikes, while longer-term US Treasury yields continued to rise, firmly limiting gold’s upside.  

As the yield curve steepened, the dollar weakened from its pre-meeting levels. For gold, a weaker dollar makes the dollar-denominated metal cheaper for holders of other currencies, providing near-term support. If the Fed and the dollar are the immediate variables facing gold, oil prices represent an unseen ceiling overhead. On Wednesday, an attack on a refinery in Saudi Arabia reignited concerns over supply risks stemming from the Middle East conflict. Geopolitical risks, combined with supply disruptions, have once again made oil prices a central variable in inflation-driven trading.  

Investors are now awaiting US PCE inflation data scheduled for rel

ease on Thursday for further insight into the monetary policy outlook. PCE is the Fed’s preferred inflation gauge. A stronger-than-expected reading could revive bets on a December rate hike, supporting Treasury yields and the dollar while weighing on gold. A weaker-than-expected reading could give gold some near-term breathing room, as a softer dollar and easing rate hike expectations reinforce one another.  

Market Insight:

Gold currently has support, but both supportive and restrictive forces are strong. Chasing further gains is becoming less attractive in terms of risk and reward, leaving prices locked in repeated swings around $4,000. In the near term, gold’s upside may be limited, but a sharp sell-off also appears unlikely. A clearer direction will depend on more definitive signals from inflation data and central banks.