【TMGM Financial Recap】Fed Rate Hold Sees Dollar Ease as Oil Prices Renew Inflation Concerns; US GDP and PCE Data Come into Focus

US third-quarter GDP and September PCE figures are due this trading session, with relatively upbeat expectations potentially putting pressure on gold before publication. The metal recovered during Wednesday’s volatile trading, when buyers appeared to have a modest edge, before easing again on Thursday. Following the Federal Reserve’s decision to leave rates unchanged, a weaker US Dollar Index has helped gold, but a fresh rise in oil prices, continuing inflation concerns and heightened expectations of a December rate increase have offset that support. These competing influences leave the near-term outlook unresolved. Investors should also follow the market’s evolving assessment of the Fed’s decision.  

Wednesday’s Federal Reserve decision kept the benchmark interest rate target range at 3.75%–4.00%, matching broad expectations. Voting 10–2, policymakers opted to leave borrowing costs untouched until after next week’s US midterm elections, giving them time to assess further evidence on the inflation trend.  

Little in the accompanying statement pointed towards a dovish position. Alongside its acknowledgement of still-elevated inflation, the Fed described economic growth as strong, upgrading the assessment of solid expansion given at its September meeting. Investment remained strong, the statement added, while employment was growing in line with the labour force. Relative to September, this was a substantial change in language, with an element of forward guidance despite Fed Chair Warsh’s previously stated wish to avoid that approach. Gold’s upside was tightly restricted as longer-term US Treasury yields rose further and Warsh stopped short of committing to an end to rate increases.  

The dollar fell below its pre-meeting levels as the yield curve became steeper. Because gold is priced in dollars, that decline lowers its cost for buyers using other currencies and offers support over the near term. Beyond those immediate influences from the Fed and the dollar, however, oil prices are imposing a less visible constraint on gold. Wednesday’s attack on a refinery in Saudi Arabia brought renewed concern about supply risks arising from the Middle East conflict. Together, geopolitical risks and supply disruptions have returned oil prices to a pivotal role in inflation-led trading.  

For a clearer view of the monetary policy outlook, investors are looking to US PCE inflation data, due for rel

ease on Thursday. The Fed favours PCE as its measure of inflation. If the figure comes in above expectations, renewed speculation about a December rate increase could bolster Treasury yields and the dollar, to gold’s detriment. Conversely, a reading below expectations could provide temporary relief for gold, with dollar weakness and declining expectations of a rate increase amplifying each other.  

Market Insight: Gold Swings Around $4,000 as Opposing Forces Persist

Strong countervailing pressures remain at work even as gold retains support. With prices swinging repeatedly around $4,000, pursuing additional gains offers an increasingly unfavourable balance of risk and reward. While the scope for a near-term advance may be restricted, a pronounced sell-off also seems unlikely. More decisive signals on inflation and from central banks will be required to establish a clearer direction.