Gold Holds Its Ground as Official Buying Offsets a Fed That Won't Blink

Gold is discovering that a reprieve is not the same as a reversal. The metal edged higher in early Asian trading on Thursday even as traders kept a hefty premium on the prospect of further US rate hikes, with Reuters reporting that markets price a 16% chance of a move in October and a 92% probability for December. Spot gold changed hands at USD 4,184.90 an ounce, a modest advance that offers little comfort to anyone hoping the inflation story has finally turned.

Warsh Offers Restraint, Not a Lifeline

Kevin Warsh lent the pause narrative some weight during his appearance in Bangkok, telling the annual meetings of the IMF and World Bank that he did not want to get ahead of the committee's decisions. Markets read the Fed chief's reticence as a signal against an imminent hike, and US Treasury yields duly slipped. Reuters added that softer oil prices further eased inflation worries and gave gold a lift during the session.

The relief did not survive the day. At the close, bullion was quoted at USD 4,143.31 an ounce, down 0.6%, a reminder that the initial bid had no staying power.

CME FedWatch puts the odds of a hike at the 27–28 October meeting at 15%, against 89% for December. The distinction matters enormously for anyone holding the metal: postponing the next step drains near-term pressure from the market, but it neither abandons the tightening path nor opens the door to cuts any time soon. Goldman Sachs likewise expects a further increase in December even after an October pause.

Inflation Keeps the Door Ajar

There is a concrete reason for the Fed's caution. US consumer prices rose 3.7% year on year in September, with the core measure excluding food and energy at 2.6%. Both readings keep the debate over further policy action alive. Stronger-than-expected US import prices for September, flagged by Reuters, reinforce the same message and complicate hopes for a less restrictive stance.

Gold therefore finds itself caught between two opposing forces. Falling oil prices and lower bond yields can lend support, while hotter-than-forecast consumer and producer inflation keeps the prospect of additional tightening before year-end in play. The Fed lifted its benchmark by 0.25 percentage points on 16 September to a range of 3.75–4.00%; a pause would let that move work through the system without undoing it.

Ahead of the next decision, investors are also waiting on US PCE inflation data. That makes the accompanying communication as important as the rate call itself — a more hawkish tone could weigh on gold even if policymakers stand pat.

A Floor That Still Needs Proving

BNP Paribas sees a completed bottom only above USD 4,225 an ounce. Should a breakout materialise, the house names possible targets at USD 4,264 and USD 4,381. Those levels describe a conditional recovery scenario, not a confirmed turn in trend.

Bank of America struck a similarly guarded note on Thursday, with its analysts forecasting an average price of USD 4,000 an ounce for the fourth quarter of 2026 while flagging difficulties for gold in holding that level over the following three months. That is a projection rather than a realised move, but it underscores how much restraint persists in longer-run price expectations even after the day's modest gain.

Official Buyers Do the Heavy Lifting

Support is arriving from beyond the short-term rates trade. Bloomberg reports steadily rising gold ETF holdings, suggesting investors keep building positions despite the price weakness — more than 16 tonnes flowed into gold ETFs in the first two weeks of October, per the World Gold Council, extending the streak of inflows to 13 consecutive weeks.

China supplies the other pillar. The World Gold Council said on Friday that the People's Bank of China bought 23 tonnes in September, lifting official reserves to 2,410 tonnes. Chinese gold ETFs took in 11 tonnes that month, pushing their holdings to a record 304 tonnes.

The picture is not uniformly bright, however. Wholesale demand stayed weak, running 21% below the prior year in the third quarter, so the central-bank and fund purchases cannot be read as a broad-based surge in appetite.

The Calendar Takes Over

Two forces now pull against each other: Chinese official buying on one side, elevated expectations for further US tightening on the other, with soft wholesale demand tempering the bullish signals. The next hard test comes at the Fed's decision on 28 October, following its 27–28 October meeting, with September PCE inflation data due on 29 October. Both the rate call and the inflation numbers that follow will determine whether the current expectations hold — and whether Warsh's restraint amounts to anything more than a one-session reprieve.