Gold Performance 28th October: gold price firms after Fed, PCE up next

The gold price closed at about $4,069 an ounce on Wednesday 28 October, up about $7, or 0.2%, from Tuesday's close. The Federal Reserve held rates while two officials voted for a hike, and gold dipped on the decision before Chair Kevin Warsh's press conference knocked the dollar and lifted the metal to its high of the day.

Where did gold move on Wednesday?

Asian trade was the weak spell. Gold slid from Tuesday's close near $4,061 to about $4,030 by the time Asian dealers handed over to Europe, as oil climbed.

London won most of it back. Gold rose to around $4,055 through the London morning and was still near $4,050 when New York opened.

New York had the drama. Gold drifted to about $4,040 ahead of the 2:00 pm decision, then sank back to the $4,030 area in the first minutes of Warsh's press conference. From there it jumped about $35 in ten minutes and kept going, touching about $4,081 just after 4:00 pm before settling just below $4,070. On our data the whole $50 swing from low to high came in about 90 minutes of New York afternoon trade.

Why did gold rise?

A split Fed. The Federal Open Market Committee kept its target range at 3.75% to 4% by a 10 to 2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack wanting a quarter-point increase, Fortune reported. Cook's dissent was the surprise. The statement also said more information would help officials choose the next step, and Yahoo Finance reported that gold slipped to about $4,036 straight after the release.

Warsh did not sound like a hawk. He again gave no guidance on the next move, said the Fed did not need to "throw people out of work" to reach its inflation goal and judged that "monetary medicine was starting to work", according to Newsquawk. The dollar fell because his remarks lacked the hawkish edge traders had braced for, and the 2-year Treasury yield edged lower. A weaker dollar and lower short-term rates both help gold, which pays no interest, as we explain in why gold falls when rates rise.

Oil kept a lid on it. Brent crude settled above $111 a barrel, up more than $2, after an attack on a Saudi Arabian refinery, Reuters reported. Hamad Hussain of Capital Economics said the risk that dearer oil pushes the Fed into a tougher stance was weighing on gold, the same pull we described in gold vs oil: why the war premium went missing. Traders still expect a December hike: Newsquawk put the odds near 85%, down from 90% before Warsh spoke.

Our number

The rise gives gold three gains in a row for the first time since mid-September, on our daily price data, and leaves it up about 1.8% this week after Friday's close below $4,000. It is still about 25% below January's record near $5,426.

Up next: what to watch tomorrow

• Thu 29 Oct: US third-quarter GDP (advance estimate) and September personal income and spending, which carry the PCE inflation gauge the Fed watches most, both at 8:30 am New York time from the Bureau of Economic Analysis.
• Thu 29 Oct: European Central Bank rate decision at 9:15 am New York time, with Christine Lagarde's press conference half an hour later. The deposit rate is 2.5% and a hike is on the table. Our earlier look at what an ECB hike means for gold in euros.
• Thu 29 Oct: Bank of Japan decision, due late Thursday night New York time (Friday morning in Tokyo).