Gold Climbs Back Above $4,000 as Oil Cools, With the Federal Reserve Up Next

Gold spent Monday repairing some of last week's damage. Spot prices traded around $4,020 an ounce by mid-afternoon in New York, roughly $27 above Friday's close, after the metal had slipped to $3,975 on Friday, its lowest point since July 20. That Friday low capped the steepest weekly decline in more than four months, according to Kitco News, so a rebound of this size is better described as relief than as a new uptrend.

Cheaper oil did the heavy lifting

The clearest driver today was crude oil. Brent fell about 2% toward $114 a barrel in the European morning as diplomatic efforts around Iran and the Strait of Hormuz eased some fear of fresh supply disruption, as Reuters reported. Oil matters for gold right now because expensive energy keeps inflation high, and high inflation keeps the Federal Reserve leaning toward more rate increases. When oil eases, the market can price slightly less tightening, which lowers the opportunity cost of holding a metal that pays no interest.

This 4,000 level is seen by some as a buying opportunity.

Bargain hunters clearly showed up near that round number. Still, the same analysts point out that the upside looks limited while rate hikes remain on the table, and Bob Haberkorn of StoneX told CNBC that he expects light trading around $4,000 until the Federal Reserve speaks.

Yields and the dollar: no help, no harm

Bond markets were calm. The 10-year Treasury yield was little changed at about 4.98% on Monday, according to CNBC, well below this month's high above 5.3%. That earlier drop in yields has been one of the quiet supports for gold. The dollar index, which tracks the dollar against six major currencies, edged up to around 101.98 in the morning, per FXStreet. A firm dollar normally weighs on gold, so holding gains against a slightly stronger dollar is a modest sign of underlying demand.

The Federal Reserve decides on Wednesday

The week's main event is the Federal Reserve decision at 2:00 PM Eastern Time on Wednesday, followed by Chair Kevin Warsh's press conference at 2:30 PM. Futures markets put the chance of holding rates at 3.75% to 4.00% above 90%, yet they still assign about an 80% probability to a quarter-point hike by December. With September consumer prices up 3.7% from a year earlier, analysts at Deutsche Bank expect the overall message to stay hawkish even with a pause. For gold, the tone of the statement and press conference matters more than the decision itself: any hint that a December hike is less certain would likely help, while a firm warning on inflation could push prices back toward last week's lows.

Steady official buying, softer fund demand

Under the surface, demand is mixed. China's central bank added 21 tonnes of gold in September, its largest monthly purchase in three years and its 23rd straight month of buying, lifting its reserves to 2,196 tonnes, according to Kitco News, citing the People's Bank of China. Poland has been the largest buyer this year through August, according to the World Gold Council. That kind of patient buying tends to cushion deep sell-offs. Investment funds, by contrast, have been sellers: holdings of SPDR Gold Shares, the largest gold exchange-traded fund, stood at 1,041.65 tonnes in the latest daily report, after three straight days of outflows, leaving the fund down 14.05 tonnes so far in October.

What the charts say

On the hourly dashboard, gold reads Strong Buy, with most hourly moving averages and momentum indicators pointing up. The bigger picture disagrees: the 5-hour, daily and weekly charts all read Strong Sell, and price sits below every daily moving average. In practice that makes today's move a counter-trend bounce. Nearby resistance sits around $4,028 to $4,030, today's high, then $4,036. Support comes in near $4,014 to $4,017, then $4,001 to $4,004, with $3,988 and Friday's $3,975 low below. The key levels page tracks these hour by hour.

The week ahead

Tuesday brings durable goods orders at 8:30 AM and consumer confidence at 10:00 AM. After Wednesday's decision, Thursday morning delivers the first estimate of third-quarter growth and September's Personal Consumption Expenditures inflation, the Federal Reserve's preferred gauge, followed by the Employment Cost Index on Friday. The midterm elections on November 3 are also on traders' radar. The full schedule is on the economic calendar.

Bottom line: gold has found buyers near $4,000, but the daily trend is still down and the Federal Reserve holds the key. This is general analysis for education, not financial advice.