Gold Price Forecast XAU/USD – Rangebound as Traders Focus on Fed

Gold futures are nearly unchanged early Wednesday. Volume is light and the range is tight, suggesting investor indecision and impending volatility following yesterday’s volatile session.

Traders are being cautious ahead of today’s U.S. Federal Reserve’s policy decision after cooler-than-expected inflation data fanned expectation of a moderate interest rate hike path.

At 04:32 GMT, February Comex gold futures are trading $1821.20, down $4.30 or -0.24%. On Tuesday, SPDR Gold Shares ETF (GLD) settled at $168.47, up $2.79 or +1.68%.

Tuesday’s Recap

Gold futures hit their highest level since August 10 on Tuesday as a smaller-than-expected rise in U.S. consumer prices buoyed bets for a slowdown in rate hikes.

All Eyes on the Fed

Gold traders are now focused on the Fed’s decision scheduled at 19:00 GMT. Central bank policymakers are widely expected to increase rates by 50 basis points at its final meeting of the year.

Tuesday’s cooler CPI data is not likely to change the Fed’s mind about a 50 basis point rate hike, but it could have an impact over the long-term. Traders are hoping Fed Chairman Powell gives some guidance on the expected terminal rate and the duration of future rate hikes.

Gold prices could spike to the upside if the Fed sounds dovish. Limiting gains, however, will be a hawkish outlook from Powell.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1839.60 will signal a resumption of the uptrend. A trade through $1752.90 will change the main trend to down.

The minor trend is also up. A trade through $1778.10 will change the minor trend to down. This will shift momentum to the downside.

The nearest resistance is a long-term 50% level at $1861.30. The closest support is a Fibonacci level at $1804.30.

Daily Swing Chart Technical Forecast

Trader reaction to $1825.50 is likely to determine the direction of the February Comex gold futures contract on Wednesday.

Bullish Scenario

A sustained move over $1825.50 will indicate the presence of buyers. Taking out $1836.90 will indicate the buying is getting stronger with $1861.30 the next target. A trade through this level could extend the rally into $1915.30.

Bearish Scenario

A sustained move under $1825.50 will signal the presence of sellers. The first downside target is $1804.30. Following this price is a pair of 50% levels at $1785.20 and $1771.50. The latter is a potential trigger point for an acceleration into $1734.70 to $1710.50.