Gold Price Today and Where It's Headed

The gold price today is up $2.80 to $1,062.90 ahead of the U.S. Federal Reserve meeting likely to cause a bump in markets.

In the face of persistent weakness both in stocks and oil, gold prices stood their ground last week. Meanwhile, gold stocks last week fell down about 1.5%, the S&P 500 retreated 2.75%, and oil slipped a hefty 9%.

The VIX S&P 500 volatility index climbed over 30% last week, showing a growing uneasiness and a marked move away from complacency.

This all comes as we quickly approach "R-Day," Wednesday, when the Fed announces its decision on a likely rate hike.

Here's what went down, and what you need to watch, with the gold price today...

Gold Price Moves Investors Need to Know

Last week started out as a challenging one for stocks and oil, which have succumbed to weakness, while gold managed to maintain its stance.

Anticipation of the Fed's rate hike, odds for which now stand at over 80%, have likely been causing these gyrations as the market tries to digest the uncertainty.

cme-stock-watch

But what I think is most worth pointing out at this juncture is the reaction in the U.S. Dollar Index (DXY).

It's widely believed that the U.S. dollar should rise if rates rise, which at this point is looking all but assured.

And yet here's how the DXY has behaved over the past two weeks:

 dollar-index-chart

After trading north of the 100 level as recently as Dec. 2, the U.S. Dollar Index has been on a steady and perhaps counterintuitive decline as we've gotten ever closer to Fed day. It seems we have a classic case of "buy the rumor, sell the news" for the U.S. dollar.

It's very possible that, as the rate hike becomes official, the dollar's recent peak near 100 may well have marked the beginning of a new bear. And if that's the case, it will only help gold begin a new upward cycle.

But there are other indicators to watch for clues as to the gold price's direction in the near and medium terms.

Gold Price Indicators to Watch Now

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Bloomberg last week reported some bullish news for central bank gold purchases. It seems China's been taking advantage of the weaker gold price over the last few months to stock up.

According to Bloomberg, the People's Bank of China (PBOC) likely bought some 21 metric tons of gold in November, the most in at least five months. Ole Hansen, analyst at Saxo Bank A/S in Copenhagen, said about the PBOC, "They are continuing to diversify their foreign reserve holdings... They're thinking long term and they see this as an opportunity to accumulate while the prices have come down."

And China's been on a steady buying spree, adding 19 tons in July, 16 tons in August, 15 tons in September, and 14 tons in October.

As well, the Commitment of Traders (COT) report, which recently indicated very low short positions by commercial traders (smart money), has only gotten more bullish for gold.

The most recent COT report, which accounts for data until Dec. 1, indicates that commercial traders are positioned at just 7,000 contracts on the long side.

Swiss bank UBS said, "Market positioning suggests that the gold market has also been preparing itself for a Fed rate hike - net speculative longs are currently at the lowest in 14 years." And the bank continued, "Extreme short positioning suggests that the risk of a more dramatic short-covering rally is currently elevated, particularly if a rate hike is accompanied by dovish rhetoric."

So the smart money has dropped its short position on gold to the lowest in 14 years, meaning it's anticipating a potentially strong bounce in the gold price.

They may be onto something...

If we look at the price action in gold, we see encouraging signs there, too.

gold-nasdaq-stock-chart

With the Relative Strength Indicator (RSI) surging from 30 to 50 in the past week, a strong bounce after the early-month sell-off, and a rising MACD indicator, the technical picture is looking pretty bullish, too.

Needless to say, all eyes and ears will be on the Fed this week. If the smart money lives up to its name, we could see a strong short-covering rally reflected in the gold price today, as UBS has suggested.

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