Gold firms as softer US PCE inflation cools October Fed hike bets

Gold gains after the Fed’s preferred inflation measure comes in below expectations.
Softer PCE data and less hawkish Fed remarks reduce expectations of an October rate hike.
The technical outlook remains bearish as XAU/USD remains below its key daily moving averages.

Gold (XAU/USD) trades modestly higher on Wednesday, consolidating the previous day’s gains after recovering from a seven-week low touched on Monday. A pullback in the US Dollar (USD) and US Treasury yields supports the non-yielding metal following softer-than-expected US Personal Consumption Expenditures (PCE) data. At the time of writing, XAU/USD trades around $4,200, up 0.45% on the day.

Data released by the US Bureau of Economic Analysis (BEA) showed that the core PCE Price Index rose 0.2% MoM in August, below the 0.3% forecast but above July’s 0.1% increase. Headline PCE inflation climbed 0.3% MoM, also below the 0.4% expected and up from 0.1% previously. On an annual basis, core and headline inflation held steady at 3% and 3.4%, respectively, both below market expectations.

However, stronger growth and employment figures partly overshadowed the softer inflation data, limiting the pullback in the US Dollar and Treasury yields. The US economy expanded at an annualized rate of 2.2% in the second quarter, above the 1.5% forecast and previous estimate, while ADP Employment Change rose by 90K in September, beating expectations of 70K and accelerating from 36K previously.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.20 after reaching a two-month high of 101.61 on Tuesday. The benchmark 10-year US Treasury yield holds around 5.23%, below the previous day’s peak of 5.29%, its highest level since 2007.

The softer-than-expected figures tempered expectations that the Federal Reserve (Fed) will raise interest rates again in October, with the probability falling to around 37% from 70% earlier this week, according to the CME FedWatch Tool.

Meanwhile, less hawkish remarks from New York Fed President John Williams on Tuesday also encouraged traders to scale back expectations of a rate hike as soon as next month.

“With the policy action we took at our September meeting, there is no need for urgency,” Williams said. He added that “if the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target.”

With inflation still running above the Fed’s 2% target, policymakers remain committed to bringing price pressures under control. The median projection released after the September meeting placed the policy rate at 4.1% for 2026, suggesting that officials still expect to raise rates once more this year. These hawkish expectations remain a key headwind for Gold, leaving the metal on track to end September in negative territory.

However, energy-driven inflation risks could ease as Middle East crude supplies show signs of recovery. Reuters reported that Saudi Arabia resumed tanker loadings at Yanbu after restarting its East-West pipeline, while Goldman Sachs estimated that Gulf Oil exports returned to their 2025 average over the past week. The US also announced that it would offer up to 40 million barrels from its Strategic Petroleum Reserve.

Attention now turns to Friday’s US Nonfarm Payrolls (NFP) report for further clues about the strength of the labour market and the Fed’s policy path.

Technical Analysis: XAU/USD remains vulnerable while below major SMAs

On the daily chart, XAU/USD keeps a bearish near-term bias as spot holds beneath the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) clustered between roughly $4,288 and $4,538. The relative strength index (RSI) at 40 sits below its midline, while the Moving Average Convergence Divergence (MACD) indicator remains in negative territory, both hinting that downside momentum still outweighs recovery attempts despite the recent stabilization off the $4,100 region.

On the topside, initial resistance emerges at the 100-day SMA at $4,288, followed by the 50-day SMA at $4,322, with the broader bearish structure reinforced by the 200-day SMA near $4,538 and a horizontal barrier at $4,700. On the downside, immediate support is seen at the horizontal level of $4,100, ahead of a deeper floor around $4,000, where a break would open the way for an extension of the prevailing corrective phase.