Gold jumps, but traders see limited upside ahead of the Fed

Gold is rising by nearly 1 percent on Wednesday, for its first positive session in six, ahead of an eagerly anticipated Federal Reserve meeting.

The Fed is widely expected to announce an increase in its short-term interest rate target. But the key question is what the central bank's outlook will look like.

"[I]f the Fed does not couch its expected rate increase in dovish language, it could lead to a stronger dollar and result in further pressure on commodity markets, particularly gold," INTL FCStone commodities analyst Edward Meir wrote in a Wednesday morning missive.

The yellow metal on Wednesday was getting an assist from a dropping dollar. Economic data came in particularly soft, with retail sales suffering their biggest drop in more than a year, and consumer prices dipping on a month-over-month basis.

The disappointments sent the U.S. dollar index, which measure's the greenback's value against a basket of other currencies mostly composed of the euro, to the lowest levels of the year. Of course, a dropping dollar tends to be good news for gold prices, since it takes more of those less-valuable dollars to buy the same amount of gold.

Given expectations that the Fed will provide a statement indicating less of a willingness to hike than is currently expected, "I think gold could see a little more pressure," Bill Baruch of IITrader said Tuesday on CNBC's "Power Lunch."

That said, Baruch spots support on the charts at around $1,250, which is just a bit below the metal's Wednesday morning high of $1,281.70.

"I'm looking for gold to get down to there, but ultimately I don't think it's the Fed that could be the catalyst to send gold higher," Baruch said.

On the other hand, Piper Jaffray technical analyst Craig Johnson notes resistance on the chart at $1,300.

Unsurprising, due to the limited upside he sees for the metal, "I'm not a fan of being in gold at this point in time," Johnson said Tuesday on "Power Lunch."

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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