Gold Price Forecast XAU/USD – Gains Capped by Fed’s Hawkish Tone

Gold futures are edging lower in a limited trade late in the session on Wednesday as the US. Federal Reserve signaled that interest rates would stay elevated going into the new year and said it was too soon to consider rate cuts.

At 20:30 GMT, February Comex gold futures are trading $1818.90, down $6.60 or -0.36%. The SPDR Gold Shares ETF (GLD) is at $168.09, down $0.42 or -0.25%.

Fed Sees No Immediate End to Rate Hikes

Prices fell initially after the Fed continued its battle against inflation by raising its benchmark interest rate to the highest level in 15 years. The Federal Open Market Committee (FOMC) voted to boost the overnight borrowing rate half a percentage point, taking it to a targeted range between 4.25% and 4.5%.

Gold lost more ground after Fed officials said they expect to keep rates higher through next year, with no reductions until 2024.

Hawkish Comments from Fed Chair Powell

Gains were capped by hawkish comments from Fed Chair Jerome Powell.

“Our focus right now is really on moving our stance to one that is restrictive enough to ensure a return of inflation to our 2% goals over time, it’s not on rate cuts,” Chair Jerome Powell said at the news conference following the Fed’s latest policy-setting meeting.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. Wednesday’s inside trade suggests investor indecision and impending volatility.

A trade through $1836.90 will signal a resumption of the uptrend. A move through $1752.90 will change the main trend to down.

The nearest support is a Fibonacci level at $1804.30, followed by a pair of 50% levels at $1785.20 and $1771.50. The closest resistance is a long-term 50% level at $1861.30.

Daily Swing Chart Technical Forecast

Trader reaction to $1804.30 will determine the direction of the February Comex gold market into the close on Wednesday.

Bullish Scenario

A sustained move over $1804.30 will indicate the presence of buyers. Taking out $1836.90 will indicate the buying is getting stronger. This could trigger an acceleration into the long-term 50% level at $1861.30.

Bearish Scenario

A sustained move under $1804.30 will signal the presence of sellers. This could trigger the start of a labored break with $1785.20 and $1771.50, potential downside targets.