Gold gains ground above $4,150 as Fed avoids policy signals, geopolitical risks stay in focus

• Gold price gains ground to near $4,175 in Monday’s early Asian session.
• Fed Chairman declined to signal an imminent policy move during remarks at the IMF meetings in Bangkok.
• Geopolitical risks and the US-Iran situation will be closely watched.

Gold price (XAU/USD) drifts higher to around $4,175 during the early Asian trading hours on Monday. The precious metal recovers amid fading expectations for a Federal Reserve (Fed) rate hike. Traders will closely monitor the developments surrounding geopolitical risks and Middle East tensions.

Despite hotter-than-expected US inflation data, market expectations have shifted. Fed Chair Kevin Warsh voiced optimism about US economic strength but gave no clues about the US rate-path trajectory. Traders largely expect the Fed to hold rates steady in the October policy meeting, while pricing in a 91.8% probability of a rate hike in December, according to the CME's FedWatch Tool.

"While inflation remains a concern and further tightening cannot be ruled out, Warsh’s latest tone suggests little urgency to deliver consecutive rate hikes," said Gerald Gan, chief investment officer at Reed Capital Partners.

US President Donald Trump said he cut a diesel export deal with Russia and blocked numerous sanctions because he doesn’t want to drive Vladimir Putin away from peace talks with Ukraine, per Bloomberg.

Meanwhile, an Iranian official warned on Sunday that Tehran has prepared a new retaliation plan for any renewed US-Israeli attack, as maritime authorities reported several separate attacks on commercial vessels around the Strait of Hormuz. Ongoing tensions between Russia and Ukraine, and conflicts in the Middle East could drive oil-inflation concerns and weigh on the yellow metal.

Bond rally deepens as AI growth worries outweigh hawkish US data

According to Deutsche Bank’s Early Morning Reid report, “the theme of the day was a big global rate rally, as the prospect of slower AI growth pushed yields lower across the board.” In the US, “the 2yr yield (-5.9bps) fell to 4.74%, whilst the 10yr yield (-12.7bps) was down to 5.06%.” Deutsche Bank highlights that this was “a global pattern as well, with yields on 10yr bunds (-5.3bps), OATs (-8.5bps) and BTPs (-6.7bps) all falling over the session.”

The bank stresses that this move came “even as bonds were rallying” in the face of “another batch of hawkish US data,” noting that “AI growth concerns continued to outweigh the inflation impulse when it came to yields.” They flag “a huge upside surprise in PPI inflation, with headline inflation up +1.3% in September (vs. +0.6% expected),” yet real yields still moved lower, reinforcing the recent backdrop of falling US real rates and easing breakevens that has been supportive for Gold.

Warsh flags investment surge and AI demand risks while avoiding policy pre-commitment

Fed Chair Warsh delivered a moderately constructive but cautious message, with a 5.6/10 FXS Speechtracker score undershooting the 6.1/10 historical average and signaling slightly softer conviction than the established baseline. The admission of being “over-scarred from the global financial crisis” underscores a persistent risk-averse bias even as Warsh highlights a structural growth and investment surge driven by “good policies,” and stresses that upcoming October and December meetings will be the “crystallizing moment” for judging output, employment, and inflation. Warsh’s focus on AI as a near-term demand-side force with uncertain employment effects, alongside an insistence on not pre-judging meetings, points to a Fed that is open to further tightening if data warrant but reluctant to pre-commit, a stance that is mildly supportive for the Dollar via higher-for-longer expectations tempered by risk-management caution.

The FXS Fed Sentiment Index was unchanged on the speech, with a 0.00-point move leaving the index at 127.51, firmly in hawkish territory despite the slightly softer FXS Speechtracker score relative to the historical average. The stable but elevated FXS Fed Sentiment Index level suggests markets see Warsh’s emphasis on price stability, investment-led structural growth, and AI-driven demand as consistent with a still-hawkish reaction function, even if the tone was somewhat less forceful than the established baseline.

Technical Analysis: Gold remains capped under the 100-day SMA

In the daily chart, XAU/USD holds beneath a dense cap of resistance that keeps the near-term tone bearish. Spot gold is lodged under the 20-period Bollinger simple moving average and the 100-day simple moving average, suggesting rallies remain vulnerable while price stays below these reference lines. The upper Bollinger band marks a more distant ceiling, while a subdued Relative Strength Index at 45.92 hints at weak upside momentum rather than oversold stress.

On the downside, initial support is aligned with the lower Bollinger band around $4,053.65, where volatility-based demand could emerge if sellers extend the decline. On the topside, a daily close back above the mid-Bollinger band at $4,185 would be the first sign of stabilization, though bears would likely defend the 100-day SMA at $4,240 ahead of the upper band barrier at $4,315.

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