Gold slips as dollar strengthens ahead of US Fed meeting

Gold held steady above $4,000 during the Asian session on Tuesday, as the US Dollar (USD) gained strength. Traders were waiting to see the outcome of the Federal Open Market Committee (FOMC) policy meeting that would take place the following day. Federal Reserve officials had suggested there was no rush to raise interest rates. However, traders were pricing in an 80% likelihood of another interest rate hike at the December meeting.

Inflation concerns due to high energy prices added to the likelihood of additional Fed tightening. Focus would now be on the FOMC meeting and comments from Fed Chair Kevin Warsh in the post-meeting press conference, as economic projections were not yet available. Other indicators that would provide further insight into the Fed's policy path included the Advance Q3 GDP and Personal Consumption Expenditures (PCE) Price Index.

The market remained cautious ahead of the key central bank event and data risks. A modest rise in US bond yields, coupled with Middle East tensions, supported the safe-haven dollar. Regional instability, with Houthis attacking Saudi Arabia and Hezbollah potentially resuming hostilities with Israel, favored the dollar and suggested that gold would likely continue its downward trend.

The commodity was trading below its 200-day Simple Moving Average (SMA) at $4,198.08, acting as a primary barrier to further gains. Technical analysis indicated a bearish near-term outlook, with gold trading below the SMA and momentum indicators showing only a slight improvement. Gold would need to fall below $4,000 to justify further losses, while resistance on the upside was at the $4,065-$4,075 range and above the $4,100 mark, where it could test the 200-day SMA and the $4,200 level.

The Federal Reserve's dual mandate of price stability and full employment guided monetary policy, with interest rates serving as the primary tool to achieve these goals.