Gold Begins to Rebound: Could Signals from the Fed Pave the Way for Gold to Break Through US$4,200?

Global gold prices showed signs of recovery during trading on Monday (October 19, 2026), following a period of pressure throughout the previous week. Spot gold rose by approximately 0.4% to US$4,180.97 per troy ounce during morning trading in Asia, recovering from a 0.7% decline recorded over the prior week. This gain serves as an early indicator of improving market sentiment, particularly as investor concerns regarding a potential interest rate hike in the United States begin to subside. Nevertheless, gold remains in a recovery phase and requires further momentum to solidify a sustained upward trend.

From a fundamental perspective, the primary driver behind gold’s recovery is a shift in expectations regarding Federal Reserve (Fed) policy. Comments made by Fed Chair Kevin Warsh during an IMF meeting in Bangkok led investors to scale back their forecasts for an interest rate hike in October. The probability of a 25-basis-point increase is now estimated at below 20%, prompting the market to increasingly consider the possibility that the Fed will hold interest rates steady at its October 27–28 meeting. This scenario creates a positive environment for gold, as unchanged interest rates diminish the relative appeal of the U.S. dollar and interest-bearing investment instruments compared to precious metals.

Beyond shifting interest rate expectations, a weaker U.S. dollar and declining yields on U.S. government bonds have also bolstered gold prices. A weaker dollar makes gold relatively more affordable for investors using currencies other than the greenback, while lower bond yields enhance the attractiveness of gold—an asset that does not pay interest. Meanwhile, geopolitical tensions in the Middle East—including security disruptions near the Strait of Hormuz—continue to sustain demand for gold as a safe-haven asset. This combination of factors has helped maintain buying interest, even as the risk of inflation driven by high energy prices has yet to fully dissipate. From a technical perspective, gold’s price action shows signs of recovery after successfully holding above the psychological level of US$4,000 per troy ounce. In the short term, the US$4,170–US$4,160 range serves as an initial support area, which is crucial for maintaining the recovery momentum. Meanwhile, the US$4,190–US$4,200 range acts as the nearest resistance, likely to test the strength of the buyers. Should the price break through and sustain itself above US$4,200, the potential for further gains toward the US$4,220–US$4,235 range increases. Conversely, a failure to breach this resistance could trigger profit-taking, potentially pushing gold back down to test support levels around US$4,160–US$4,140. These levels are part of a short-term analysis and still require confirmation through actual price movement.

Although sentiment is improving, investors should remain mindful of risks that could cap gold’s upside. U.S. consumer and producer inflation data, which came in higher than expected, suggest that price pressures remain a challenge for the Federal Reserve. Furthermore, rising oil prices—driven by conflict in the Middle East—could keep inflation elevated for longer. If these conditions lead the market to once again anticipate interest rate hikes, the U.S. dollar and bond yields could strengthen, thereby exerting pressure on gold. Consequently, the current price recovery does not entirely eliminate the risk of a correction, especially as the Federal Reserve’s interest rate decision approaches at the end of October.

Overall, the outlook for gold in today’s trading session leans positive in the short term, supported by easing expectations for interest rate hikes, improved investor sentiment, and the demand for safe-haven assets amidst global uncertainty. As long as the price remains above the US$4,160 level, the possibility of re-testing the psychological barrier of US$4,200 remains in play. However, breaking through resistance is a crucial factor in determining whether this recovery can evolve into a stronger uptrend. For market participants, the primary focus is now on the movements of the US dollar, bond yields, and shifts in expectations regarding Federal Reserve policy. While gold has indeed begun to rebound, its ability to break past US$4,200 will serve as a key test for the continuation of its gains.