Gold rangebound as easing October Fed bets clash with firm December hike pricing

Gold attracts some buyers on Monday amid receding October Fed hike bets and sliding bond yields.
Traders still see around a 90% chance of a December Fed rate hike, which caps the precious metal.
Geopolitical tensions lend support to the safe-haven USD, which further keeps a lid on the commodity.

Gold (XAU/USD) attracts some buyers at the start of a new week, though it lacks bullish conviction and remains below the $4,200 mark through the Asian session. US Federal Reserve (Fed) Chair Kevin Warsh’s unwillingness to provide any cues on further policy moves led to a reduction in odds for policy tightening later this month. Moreover, the recent sharp retracement slide in US government bond yields from multi-year highs, which dragged the US Dollar (USD) to a two-week low, acts as a tailwind for the bullion.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Fed blackout looms as Warsh’s silence cuts October hike odds

Deutsche Bank’s strategists note that with the Fed about to enter its blackout period ahead of the October 27–28 meeting, Kevin Warsh declined to push back against market rate expectations, stressing that he doesn’t “prejudge meetings” even after this week’s hotter inflation data. According to the bank, markets interpreted the absence of a more hawkish tone as a positive surprise, with “October hike pricing dropping to around 15% from roughly 30% as he spoke,” while “S&P and Nasdaq futures are both +0.15% higher having been negative for most of the session before he spoke,” and “Stoxx futures are +0.68% higher.”

Meanwhile, last week's hotter-than-expected US inflation reports lifted market bets for an imminent Fed rate hike. According to CME Group's FedWatch Tool, traders are pricing in over a 90% chance that the US central bank will raise borrowing costs in December. Furthermore, energy-driven inflation fears underpin prospects for further policy tightening by the Fed. In fact, crude oil prices surged to a nearly one-month high on Friday as escalating hostilities in the Middle East and Eastern Europe kept supply risks elevated.

Three tankers were also damaged in the Strait of Hormuz over the weekend as Iran’s IRGC navy maintained that the waterway remained closed and vessels could pass only with its authorization. In Europe, Ukrainian attacks sparked fires at an oil export terminal and a storage depot in St. Petersburg on Sunday, as Kyiv launched more than 1,000 drones at Russia in one of the war’s largest aerial assaults. Moreover, clashes between Saudi Arabia and the Iran-backed Houthi rebel group in Yemen have shown little sign of abating.

Adding to this, a secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, warned that Tehran has prepared a new retaliation plan for any renewed US-Israeli attack. This keeps the geopolitical risk premium firmly in play, acting as a tailwind for crude oil prices and easing the selling bias surrounding the safe-haven Greenback. This keeps the Gold price confined within a familiar range held over the past three weeks or so, making it prudent to wait for strong follow-through buying before positioning for further gains.

XAU/USD 4-hour chart

Technical Analysis

The range-bound price action could be categorized as a bearish consolidation phase against the backdrop of a fall from the $4,700 neighborhood, touched in August. Moreover, the XAU/USD pair remains decisively below the 200-period Simple Moving Average (SMA) on the 4-hour chart, suggesting that recent gains are still unfolding within a broader corrective phase rather than a confirmed uptrend.

Meanwhile, the Relative Strength Index (14) at 55.1 leans modestly to the bullish side, and the Moving Average Convergence Divergence (MACD) stays above zero with a positive, though slightly softening, profile. Nevertheless, acceptance above the $4,200 mark and a move beyond the trading range barrier, around the $4,215-$4,220 region, is needed to ease the prevailing downside pressure and open the way for a more constructive medium-term outlook.

On the downside, the $4,150-$4,145 area could offer immediate support ahead of the $4,100 round figure and last week's swing low, around the $4,075-$4,065 region. A convincing break below the latter would make the Gold vulnerable to challenge the year-to-date (YTD) low, near the $3,957 zone, touched in July.

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

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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