Gold is rallying again after two weeks of selling pressure, with traders increasingly convinced the Federal Reserve will leave interest rates unchanged at this month's meeting. The precious metal climbed toward $4,180 an ounce on Monday as investors recalibrated their expectations in the wake of remarks from Fed Chairman Kevin Warsh.

The rebound comes despite a weekly loss of 0.7%, and the broader picture remains difficult. Gold has shed nearly 20% of its value since tensions between Iran and the United States began in February, placing it in bear-market territory—a decline conventionally defined as a drop of 20% or more from a recent peak. Even so, buying interest has emerged every time prices have touched the $4,000 mark, a pattern in place since August.

Kevin Warsh just complicated the Fed's interest rate outlook

The latest surge followed a shift in expectations for US interest rates. After last week's inflation reading, traders had positioned themselves for another rate increase. September brought higher-than-expected import prices in the United States, with energy costs among the contributors to the rise. That data lifted the dollar and made a further hike look more probable. Dollar moves matter for bullion because gold is priced in US dollars, meaning currency swings change the metal's effective cost for buyers holding other currencies.

Warsh's subsequent remarks, however, undermined conviction in that scenario. The CME FedWatch Tool, which derives its estimates from fed funds futures—contracts tied to the Federal Reserve's benchmark rate—now puts the probability of an increase this month at just 13%, while odds of a December move stand near 89%. Previously, the chances of a rise had been even lower than one in five.

The implications for gold are straightforward. Unlike sovereign bonds and savings, gold pays no interest to its holder, so high interest rates make the metal less attractive relative to income-generating alternatives. Weaker rate expectations, by contrast, strengthen the case for holding it.

Warsh also suggested the Fed may have become overly cautious as a result of lessons learned from the 2008 Global Financial Crisis. He nonetheless sees room for stronger economic growth and greater investment under what he described as “good policies.”

Neither remark signals a commitment by the Fed to either course. Warsh appears unwilling to tie policymakers' hands on October or December decisions without further evaluation of the economic data. He also believes artificial intelligence has the potential to be a driver of economic demand, though he does not know how its adoption may affect employment rates.

Attention now turns to the October 27-28 Federal Open Market Committee meeting—the Fed's rate-setting body—and next week's Personal Consumption Expenditures inflation report, the measure the Fed uses to assess progress toward its 2% inflation target.

Across the Atlantic, the International Monetary Fund expects the European Central Bank to raise rates by another 25 basis points—a basis point being one hundredth of a percentage point—at least once before year-end.

Gold is recovering, but the charts are not celebrating

Despite Monday's advance, the technical picture is less encouraging than the price action might suggest.

XAU/USD, the spot price of gold quoted against the US dollar, stands at approximately $4,176.14, below several important moving averages—levels traders monitor to determine whether buyers or sellers currently have the upper hand. The first obstacle sits around $4,191, where the 21-day simple moving average could attract fresh selling. Above that, the 100-day average stands near $4,239, while the 50-day average around $4,327 represents another difficult barrier.

Gold would need to close above the first two levels to weaken the immediate bearish setup, and a sustained move beyond $4,327 would provide stronger evidence that the correction is losing momentum. The 200-day moving average near $4,520 remains a major longer-term resistance level.

Meanwhile, the 14-day Relative Strength Index, a momentum gauge, stands at 46, slightly below its neutral reading of 50, suggesting buying momentum remains relatively weak despite the recovery. If sellers return, the former rising trendline near $4,000 becomes the next important area to watch.

Other precious metals advance; oil slips

Other precious metals also gained on Monday. Silver climbed 1.3% to $57.73, platinum rose 1.1% to $1,647.75, and palladium advanced 1.7% to $1,131.29.

Elsewhere, oil prices slipped after Trump waived certain sanctions and tariffs affecting Russia, potentially allowing more Russian fuel into global markets.

With Monday's US economic calendar empty and Fed officials observing their pre-meeting communications blackout—the customary quiet period in which policymakers refrain from commenting on monetary policy ahead of a meeting—traders are focusing on dollar movements, Europe's civil unrest, stronger Chinese economic data, and signs of improving geopolitical conditions.