Gold Slips to About $4,046 as Oil, Yields and the Dollar Firm Before the Federal Reserve Decision

Gold is treading water on the morning of the Federal Reserve decision. Our dashboard had spot gold at about $4,046 an ounce at 7:08 AM Eastern Time, roughly $15 below Tuesday's close of $4,061, after an overnight dip to around $4,029. That pullback follows a solid Tuesday: Investing.com noted bullion was still holding a gain of about 1.1% from the previous session, so the metal has given back only part of that bounce.

Oil and yields are leaning on gold

The clearest pressure this morning comes from energy. CNBC reported that oil rose by more than $2 after an attack on a refinery in Saudi Arabia, which revived worries that expensive energy will keep inflation sticky and push the central bank toward a firmer stance. Gold pays no interest, so the longer borrowing costs stay high, the more it costs to hold.

Hamad Hussain, climate and commodities economist at Capital Economics, told CNBC that the jump in oil, and the chance it nudges the central bank toward a tougher line than traders expect, appears to be weighing on gold.

Bond markets point the same way. The 10-year Treasury yield rose a little more than 2 basis points to about 5.01% early Wednesday, and the 2-year yield was near 4.75%, according to CNBC's bond report. A move back above 5% on the 10-year note takes away some of the support gold had from lower yields last week. The dollar index, meanwhile, inched up about 0.1% to 102.42, near a two-week high, which makes gold a little dearer for buyers using other currencies.

A quiet decision, a loud press conference

The Federal Reserve announces its decision at 2:00 PM Eastern Time, and a hold at 3.75% to 4.00% is widely expected after September's quarter point hike. What matters for gold is the outlook. CNBC put futures-implied odds of a December hike at roughly 76% to 84% in separate reports this morning, and FXStreet argues that guidance from Chair Kevin Warsh could move markets more than the decision itself. A firm signal that another hike is coming would likely lift the dollar and test the $4,000 area again, while a softer tone could give gold room for a relief bounce.

Fund flows and official buying

Investor demand through exchange-traded funds is stabilizing but still weak for the month. SPDR Gold Shares bought 0.85 tonnes on Tuesday to hold 1,041.65 tonnes, its first addition after four straight days of selling, yet the fund is down 14.05 tonnes for October, based on FxFriend's holdings tracker. Analysts at ING, cited by Investing.com, said bargain hunters and physical buyers are helping gold find its footing, while ANZ pointed to stronger buying by Chinese households. Official demand remains a steady backstop: the People's Bank of China added 21 tonnes in September, its 23rd straight month of purchases, as Kitco News reported.

What the charts say

Our hourly dashboard read Sell at 7:08 AM Eastern Time. The hourly moving averages were split six to six, while the indicators leaned bearish with five Sell, three Neutral and three Buy. The shorter charts disagree with each other: the 15-minute reading is Strong Sell and the 30-minute is Strong Buy. The 5-hour reading is Buy, but the daily and weekly readings both remain Strong Sell, and price sits below every daily moving average. On our key levels page, support starts at the daily pivot near $4,039.70, then $4,034 and $4,029.40, today's low, with $4,013.10 below that. Resistance sits near $4,059.20, then $4,066.30 and $4,071. An hourly close back above about $4,053 would ease the sell tilt, while a close below $4,045 keeps $4,039.70 and $4,029.40 in play.

The days ahead

The economic calendar is crowded. The advance goods trade balance and inventories arrive at 8:30 AM Eastern Time today, ahead of the Federal Reserve decision at 2:00 PM and the press conference at 2:30 PM. Thursday brings third-quarter growth and September's Personal Consumption Expenditures inflation index, the measure the central bank watches most closely, and Friday brings the Employment Cost Index. Expect wider swings than usual around each of these releases.

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