Gold attracts some buyers as USD hits two-week low after Warsh’s neutral remarks

Gold attracts some dip-buyers as Warsh’s neutral remarks and sliding bond yields weigh on the USD.
December Fed hike bets and geopolitical risks limit losses for the safe-haven buck, capping the bullion.
Traders need to wait for a breakout through short-term range before positioning for a firm direction.

Gold (XAU/USD) turns positive for the second straight day after a modest Asian session dip, extending its recovery from the weekly trough touched on Wednesday. The US Dollar (USD) slid to a nearly two-week low after Federal Reserve (Fed) Chair Kevin Warsh’s remarks at the Annual IMF and World Bank Group Meetings did little to alter the rate outlook. In a conversation with the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, Warsh said the world has broadly conformed to our expectations since the September FOMC meeting. Warsh added that the Fed has made it clear that it will deliver price stability and that he doesn’t believe in prejudging meetings. This, along with the recent sharp decline in US bond yields, weighs on the USD and acts as a tailwind for the precious metal.

Warsh flags investment surge and AI risks as Fed keeps options open into year-end

Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 established baseline, pointing to a slightly less impactful but still broadly consistent tone. The admission of being “over-scarred from the global financial crisis” underscores a cautious bias even as Warsh highlights structural growth and an investment surge driven by “good policies,” suggesting a guarded hawkish stance that resists pre-committing on October and December decisions. Warsh’s focus on AI as a near-term demand-side force and a tool to strengthen data confidence, alongside attention to negative tailside risks, reinforces a risk-aware policy framework rather than a clear directional shift.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, leaving the overall stance firmly in hawkish territory. The steady index reading, combined with a slightly softer FXS Speechtracker score, indicates that while the speech did not escalate hawkish expectations, it maintained a robustly restrictive policy bias that should keep Dollar support intact.

Nevertheless, the energy-driven acceleration in US inflation lifted market bets for an imminent Fed rate hike by the year-end. In fact, the US Bureau of Labor Statistics (BLS) on Wednesday reported a broad increase in consumer prices in September as the US-Israeli war with Iran kept oil prices elevated. Adding to this, the US Producer Price Index (PPI), published on Thursday, advanced 1.3% last month, marking the largest gain since March 2022, and the yearly rate soared to 6.3%. Excluding the volatile food and energy components, the core PPI climbed 0.7% and 5% on a monthly and yearly basis, respectively. The suggests that inflation is broadening out beyond energy products and underpin prospects for further Fed tightening. According to the CME Group’s FedWatch Tool, traders are assigning over a 90% chance that the US central bank will raise borrowing costs again at its December policy meeting.

This, along with escalating tensions in the Middle East, could limit losses for the safe-haven USD and cap gains for the Gold. In the latest developments, the Iran-backed Houthi group carried out a deadly missile attack targeting the presidential palace, the seat of Yemen’s Saudi-backed and internationally recognised government in the southern city of Aden. Adding to this, French Foreign Minister Pascal Confavreux confirmed that France has started deploying its military assets in Saudi Arabia. Adding to this, the US military developed strike plans that include ‘mother of all bombs’ against Iranian energy infrastructure and nuclear sites. This raises the risk of a further escalation of tensions in the Middle East, which might continue to support the USD and keep a lid on the commodity.

XAU/USD 4-hour chart

Technical Analysis

The XAU/USD pair, so far, has been struggling to find acceptance above the 100-period Simple Moving Average (SMA) and remains below the 61.8% Fibonacci retracement level of the July-August upswing. That said, the Moving Average Convergence Divergence (MACD) indicator is positive and rising, hinting at strengthening upside momentum. Adding to this, the Relative Strength Index (RSI) around 56 suggests mildly bullish conditions without reaching overbought territory.

However, it will still be prudent to wait for a sustained move beyond the $4,200 mark and the 61.8% Fibo. retracement at $4,238 before positioning for further gains toward the next upside barriers near the 50.0% retracement at $4,325 and the 38.2% level at $4,412. On the downside, immediate support is offered by the 78.6% Fibo. retracement at $4,115, which is followed by the $4,075-$4,065 horizontal support. A convincing break below the latter would make the Gold vulnerable to challenging the Fibonacci structural floor at $3,957.

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