Gold Holds Near $4,010 as a Firmer Dollar Meets the Start of the Federal Reserve Meeting

Gold spent Tuesday morning hovering around the $4,000 line. Our dashboard showed spot gold at about $4,010 an ounce at 7:15 AM Eastern Time, around $8 below Monday's close, after an early slide took it to roughly $3,989. At one point overnight, CNBC reported spot gold down 0.5% at $3,995.89, so the morning bounce has repaired only part of the damage.

The dollar is doing the pushing

The main weight on gold today is a firmer dollar. The dollar index rose about 0.3% to a near two-week high, according to CNBC, and an early report from India's Times Network put it near 102.07 early in the Asian session. A stronger dollar raises the price of gold for anyone buying in euros, rupees or yuan, which tends to cool demand at the margin.

Oil is sending mixed signals. CNBC said Brent crude was around $116 a barrel after renewed attacks on Saudi Arabia, while The Hindu BusinessLine put Brent near $115 as talks involving Iran raised hopes of calmer relations. Reports differ on direction, but the level is high either way, and expensive energy keeps inflation, and therefore rate hike talk, in the conversation.

could push gold below $4,000, potentially towards $3,900.

Yields are calm before the Federal Reserve speaks

Bond markets are waiting. The 10-year Treasury yield slipped less than one basis point to about 4.98%, and the 2-year yield sat near 4.71%, according to CNBC's bond market report. That is well below the levels above 5.1% seen earlier this month, and the retreat in yields has been one of the few quiet supports for gold during last week's slide of more than 4%.

The Federal Reserve began its two-day meeting today. Traders see close to a 90% chance that rates stay at 3.75% to 4.00% on Wednesday, yet CNBC notes they still price about an 80% probability of a hike in December. That combination explains why rallies have been hard to sustain: holding a metal that pays no interest becomes less attractive when markets expect borrowing costs to rise again. The tone of Chair Kevin Warsh's press conference is likely to matter more for gold than the decision itself.

Fund selling, steady official buying

Investor demand through exchange-traded funds is soft. SPDR Gold Shares, the largest gold fund, cut its holdings by 0.85 tonnes on Monday to 1,040.80 tonnes, its fourth straight day of selling, and is down 14.90 tonnes for October, based on FxFriend's holdings tracker. Official demand is steadier: China's central bank added 21 tonnes in September, its largest monthly purchase in three years and its 23rd month of buying in a row, as Kitco News reported. That kind of buying tends to show up on dips rather than chase prices higher.

What the charts say

Our hourly dashboard read Sell at 7:15 AM Eastern Time, eased from Strong Sell the hour before, with the moving averages split six to six and the indicators leaning slightly bearish. The 15-minute and 30-minute charts flipped to Strong Buy on the bounce, but the 5-hour, daily and weekly charts all read Strong Sell, and price sits below every daily moving average. On our key levels page, resistance starts near the daily pivot at about $4,011.80, then $4,023.60 and $4,026.30, with $4,031.40 above that. Support sits near $4,004.10, then the $3,989 to $3,992 zone, and Monday's low of $3,978.30. An hourly close above about $4,020 would improve the short-term picture, while a slip back under $3,989 would put last week's lows back in view.

The days ahead

The economic calendar is busy. Durable goods orders arrive at 8:30 AM Eastern Time today, followed by consumer confidence and new home sales at 10:00 AM. The Federal Reserve decision comes Wednesday at 2:00 PM, with the press conference at 2:30 PM. Thursday brings third-quarter growth and the September Personal Consumption Expenditures inflation index, the measure the Federal Reserve watches most closely, and the European Central Bank decides the same day. Analysts quoted by The Hindu BusinessLine expect gold futures to hold roughly between $3,950 and $4,100 until the Federal Reserve has spoken.

This is general market analysis for education, not financial advice.