Gold trades near $4,180 and silver near $58 after Warsh lowers expectations of an October Fed hike

Gold edged higher in early Asian trading on Monday. Investors were weighing remarks by Kevin Warsh, the chair of the Federal Reserve, on the economy and rising inflation. Spot gold was up 0.3% at $4,175.60 an ounce at 8:29 a.m. India time, and other quotes put it near $4,183. Silver rose 74 cents to $58.48. At those prices one ounce of gold buys about 71 ounces of silver.

The rates backdrop changed on Friday. Speaking at an International Monetary Fund (IMF) event in Bangkok, Warsh said he was not signaling a decision. Markets still read his remarks as a sign the Fed would pause, and the futures-implied probability of an October hike fell from 27.7% to 16.1%. Earlier in the week, a hot inflation report had pushed those odds from 21% to 54%. The dollar index fell toward 101.69 and gave back its entire post-report gain. The Fed raised rates by a quarter point in September, and the 10-year Treasury yield climbed back to 5% after that decision.

Bitcoin traded in line with equities. It rose to about $82,500, up 1.3% over 24 hours, as South Korea's Kospi and Nasdaq futures gained on China's growth beat and lower oil prices. Israel's Globes described mixed trading across Asia and a modest recovery in New York futures ahead of a heavy earnings week, with oil falling back from a five-month high.

Gold and interest rates are moving in opposite directions from what the standard relationship would predict. Bond yields near 5% and a Fed that raised rates in September would normally weigh on gold, since it pays no yield of its own. Instead, gold has held above $4,100. That gap suggests buyers doubt the Fed will keep real interest rates (rates after inflation) positive for long if inflation keeps surprising to the upside.