Gold Sits Near $4,000 as Fed Hold and Thursday PCE Test Set the Next Move

Gold is holding near the $4,000 mark as traders weigh a Federal Reserve that kept interest rates unchanged on Wednesday against an inflation report due on Thursday that could reset expectations for the rest of the year. According to FXEmpire, the metal's near-term bias remains to the downside, with the dollar and the pace of US price increases the two forces most likely to decide the next move.

Contents

01

A Fed on Hold, With Two Voices for a Hike

02

Why the Dollar and Rate Odds Matter for Gold

03

Thursday's PCE Report Is the Next Test

04

The Levels Traders Are Watching

A Fed on Hold, With Two Voices for a Hike

The Federal Open Market Committee voted 10-2 to keep the overnight funds rate in a range of 3.75% to 4%, where it has sat since a quarter-point increase in September. The post-meeting statement said inflation remains elevated and that the committee will deliver price stability, adding that more information will help it judge the policy stance needed to return inflation to its 2% goal.

Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both wanting a quarter-point increase. It was Cook's first dissent since she joined the Fed in 2022. Dallas President Lorie Logan and Minneapolis President Neel Kashkari, who had voted against the majority at the July meeting and have argued for higher rates, this time sided with the majority.

The statement described economic activity as expanding at a strong pace, an upgrade from solid in September. Inflation has been above the Fed's 2% target for more than five years, and the pace of price increases has picked up since the September meeting. Unemployment has stayed low, and the Atlanta Fed's GDPNow tracker points to 3.4% annualised growth in the third quarter, which would be the strongest in a year.

Markets had priced in less than a 10% chance of a hike before the decision, according to the CME Group's FedWatch tool. Futures pricing now indicates a strong possibility of another increase at the December meeting and perhaps one or two more in 2027. Fed Chairman Kevin Warsh also announced changes to next year's meeting schedule, saying one 2027 meeting will focus exclusively on monetary policy strategy with no rate vote or policy statement.

Andrew Davis, head of investment strategy at Bryn Mawr Trust and a former BLS analyst, said the wait-and-see approach makes sense. "The economy is slowing, but slowing and breaking are two different things," he said, adding that holding rates steady gives policymakers more time to assess how the economy is responding to September's hike and the recent rise in longer-term borrowing costs.

Why the Dollar and Rate Odds Matter for Gold

Gold is priced in US dollars, so a stronger dollar makes it more expensive for buyers holding other currencies, and higher interest rates raise the opportunity cost of holding an asset that pays no income. Elliott Wave Monitor notes that Fed policy and rate expectations can influence that opportunity cost and affect demand for the metal, which is also widely held as a safe-haven asset during periods of market stress.

FXEmpire reported that spot gold was edging lower early Tuesday ahead of the Fed meeting, with traders blaming a stronger dollar. Prices fell below the psychological $4,000 level last week for the first time since mid-to-late July, then consolidated as traders absorbed the plunge. That week's 4% loss was the biggest decline since June, with the catalyst described as a surge in oil prices to a multi-month high that raised inflation concerns and reinforced expectations of US rate hikes.

Ahead of the decision, the October FedWatch Tool showed an 89.5% probability that the Fed would hold at 3.75% to 4.00%. For December, it showed an 18.6% probability of no change, a 73.1% chance of a 25-basis-point hike and an 8.3% chance of a 50-basis-point hike. FXEmpire said a dovish Fed outlook would likely raise the probability of no December hike and be supportive for gold, while a surprise 25-basis-point increase would likely send prices plunging.

Thursday's PCE Report Is the Next Test

The Bureau of Economic Analysis is due to publish the September personal consumption expenditures (PCE) price index on Thursday at 8:30 a.m. ET, the morning after the Fed decision. The PCE index is the gauge the Fed's 2% goal is measured against, which is why it carries weight for rate expectations and, in turn, for the dollar and gold.

FXEmpire said headline PCE was forecast to rise to 3.6% annually from 3.4%, with core PCE, which strips out food and energy, expected to tick up to 3.1% from 3.0%. It said a reading above those estimates would likely be bearish for gold and raise the odds of one or two rate hikes in December, capping any rise in prices and possibly sending them lower.

The base for the report is lower than first published. BEA's annual update on September 30 cut July's core rate from 3.3% to 3.0%, and the August report put headline PCE at 3.4% year on year and core at 3.0%. By StockTitan's calculation, the Fed's September projection of 3.4% core PCE for 2026 now requires a steady rise of about 0.33% a month from September, faster than any month since February. Core prices rose about 0.17% a month over the summer.

StockTitan also calculated that the published core rate stays at 3.0% for any September rise from about 0.18% to about 0.27%, and only shows 3.1% once the monthly rise passes roughly 0.27%. The Cleveland Fed's inflation nowcast put September's rise at 0.47% headline and 0.28% core in its October 28 update. The Fed publishes its next set of projections with the December 8 to 9 meeting.

The Levels Traders Are Watching

FXEmpire described spot gold as in a downtrend, saying a trade through $3975.65 would signal a resumption of the decline toward long-term bottoms at $3942.10 and $3886.46. The latter was recorded on October 28, 2025, when the market began pricing in two or three rate cuts for 2026. The analyst noted traders may now be pricing two or three hikes from December 2026 into 2027, making that area a key pivot to watch.

On the upside, FXEmpire placed two main tops at $4199.08 and $4217.40, with the 50% level of the $4217.40 to $3975.65 range at $4096.52 as resistance. Intermediate resistance sits at $4230.51 to $4319.60, with the 50-day moving average at $4287.52 inside that zone. A trade under $4481.78 means spot gold is in a bear market, 20% below its all-time high of $5602.23.

Elliott Wave Monitor reported that gold tested the 61.8% retracement area and pulled back to $4044.46 by 10:19 New York time on Wednesday, with a downside objective at $4028.12 still pending. It kept a bearish one-hour outlook while price stayed below an invalidation level of $4070.90, with $3989.04 and $3975.63 as lower targets if selling extends.

For forex beginners, the practical link is straightforward: US rate expectations tend to move the dollar, and the dollar tends to move dollar-priced gold in the opposite direction. Thursday's core PCE figure and the December rate-hike odds that follow it are the numbers to watch.

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