Gold prices rebounded on Monday as changing Federal Reserve interest rate expectations encouraged renewed buying interest.
The recovery followed two weeks of losses that weakened confidence in the precious metal. Investors reconsidered their positions after Federal Reserve Chairman Kevin Warsh signaled uncertainty over future monetary policy.
However, technical indicators suggest gold still faces obstacles before establishing a sustained recovery.
Gold prices rebound as Fed rate hike expectations decline
Gold climbed toward $4,180 per ounce on Monday as traders reduced expectations of an October Federal Reserve rate hike.
According to the CME FedWatch Tool, the probability of an October increase dropped to 13%. Meanwhile, traders assigned approximately 89% probability to a December increase.
The recovery followed a 0.7% weekly decline, extending gold’s two-week slump. Gold has also lost nearly 20% since US-Iran tensions escalated in February, placing the metal in bear market territory.
However, buying interest around $4,000 has repeatedly supported gold prices since August.
Kevin Warsh comments shift Federal Reserve rate outlook
Federal Reserve Chairman Kevin Warsh’s latest remarks prompted investors to reassess the likelihood of tighter monetary policy.
Previously, stronger-than-expected September US import prices had raised concerns about persistent inflation. Rising energy costs also strengthened the dollar and increased expectations of another interest rate hike.
However, Warsh avoided committing to immediate policy changes, emphasizing the importance of evaluating incoming economic data.
He also suggested the Federal Reserve had become excessively cautious following lessons from the 2008 financial crisis.
Warsh identified opportunities for stronger economic growth and investment under favorable policies. He also acknowledged artificial intelligence’s potential to support demand while expressing uncertainty about employment implications.
Lower interest rate expectations generally support gold because the metal offers no yield. Higher rates instead increase the appeal of interest-bearing assets.
Investors now await the October 27-28 Federal Open Market Committee meeting and next week’s Personal Consumption Expenditures inflation report.
The Federal Reserve uses PCE inflation to evaluate progress toward its 2% target.
Meanwhile, the International Monetary Fund expects the European Central Bank to deliver another 25-basis-point rate increase before year-end.
Gold technical indicators signal continued bearish pressure
Despite Monday’s recovery, gold remained below several important moving averages, indicating persistent technical weakness.
At approximately $4,176.14, XAU/USD faced immediate resistance around $4,191, corresponding to its 21-day simple moving average.
Further resistance stood near $4,239 and $4,327, representing the 100-day and 50-day averages, respectively.
A close above the first two levels could weaken bearish pressure. However, sustained movement beyond $4,327 would provide stronger recovery confirmation.
The 200-day moving average near $4,520 remained a longer-term resistance level.
Meanwhile, the 14-day Relative Strength Index stood at 46, indicating relatively weak buying momentum. Renewed selling pressure could push gold toward its $4,000 support area.
Other precious metals also advanced Monday. Silver gained 1.3% to $57.73, platinum climbed 1.1% to $1,647.75, and palladium increased 1.7% to $1,131.29.
Oil prices declined after President Donald Trump waived certain Russia-related sanctions and tariffs, potentially increasing global fuel supplies.
With Monday’s US calendar empty and Fed officials observing their pre-meeting blackout, investors monitored dollar movements, European unrest, Chinese economic data, and geopolitical developments.
