Gold rises above $4,050 ahead of Fed rate decision
- Gold price climbs to near $4,065 in Wednesday’s early Asian session, up 1.15% on the day.
- Softer oil prices ease some inflation worries, supporting Gold price.
- Fed policy meeting will take center stage later on Wednesday.
Gold price (XAU/USD) jumps to around $4,065 during the early Asian session on Wednesday, bolstered by lower oil prices. Traders await the Federal Reserve's (Fed) policy meeting later on Wednesday for signals on the future path of US interest rates.
Crude oil prices fall for the second consecutive day as attention turns to Middle East peace talks. However, any signs of renewed tensions surrounding the US-Iran and the Houthi-Saudi Arabia conflicts could boost energy prices and raise inflation concerns. This, in turn, could create a headwind for yellow metal as it could reinforce central banks to tighten their monetary policy.
"Softer oil prices will probably provide some lift for gold because it relieves the inflation worries and arguably moderates Fed hawkishness to some degree," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
All eyes will be on the Fed interest rate decision later in the day. The US central bank is likely to leave interest rates unchanged at the conclusion of its October policy meeting.
Markets are now pricing in only a 6.6% chance that the Fed will lift rates on Wednesday, although elevated energy prices are still prompting bets on a hike before year-end. The odds of a US rate hike in December stand at 84.4%. Higher rates increase the opportunity cost of holding non-yielding gold.
Traders will closely watch the US Personal Consumption Expenditures (PCE) data due on Thursday, the gauge the Fed watches most closely as it targets 2% inflation.
Gold vulnerability contrasts with copper recovery as crude consolidates and equities diverge
Strategists at Scotiabank observe a mixed picture across commodities and risk assets. They note that “copper is tentatively extending its recovery from the lower end of its flat range,” even as “gold appears increasingly vulnerable as it attempts to hold on to the psychologically important $4000/oz level.” In their view, “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.”
In energy markets, Scotiabank highlights 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.” On the equity side, they point out 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,” while “performance across European bourses has been generally soft.”
Warsh flags investment surge and AI risks but avoids pre-committing on policy
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10, reflecting a cautious tone despite upbeat references to structural growth and an investment surge. The admission of being “over-scarred from the global financial crisis” underscores a strong risk-management bias, even as Warsh highlights policy-driven investment strength and refuses to pre-judge upcoming FOMC decisions, keeping Dollar traders focused on data-dependent outcomes. Warsh’s emphasis on AI as a demand-side force and a tool to bolster confidence in monetary policy data adds a forward-looking, nuanced layer to the Fed’s reaction function, but without clear guidance on the near-term employment impact.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 127.51, signaling that the speech leaves the broader policy narrative firmly in hawkish territory despite the slightly softer FXS Speechtracker score. With the index well above the neutral 100 mark, markets are likely to interpret Warsh’s combination of investment optimism, AI focus, and crisis-scarred caution as consistent with a Fed that remains biased toward maintaining or tightening policy rather than pivoting dovish.
Technical Analysis: Gold
In the daily chart, XAU/USD is under a bearish near-term bias, holding below the 20-day Moving Average (middle Bollinger band) and the 100-day Moving Average, which together cap the topside and suggest the broader uptrend is losing traction. Price also trades well beneath the upper Bollinger band, underscoring a market that has retreated from prior extremes, while the Relative Strength Index (14) at 41 leans slightly negative, hinting that selling pressure still dominates on bounces.
On the topside, initial resistance appears at the 20-day simple Bollinger midline near $4,125, followed by the 100-day Moving Average around $4,220 and the upper Bollinger band at $4,235, where a break would be needed to revive a stronger bullish tone. On the downside, the lower Bollinger band at $4,015 offers immediate support; a daily close below this band would open the door to a deeper correction, while holding above it keeps XAU/USD in a consolidative pullback rather than a full trend reversal.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
