Gold Price Forecast XAU/USD – Short-Covering Rally Limited by Interest Rate Fears

Gold futures are edging higher at the mid-session on Friday but remain in a position to post their biggest weekly loss since mid-November. Helping to keep a lid on gains and drive prices lower was the hawkish tone delivered by several central banks as they signaled that more rate hikes are needed to curb inflationary pressures.

At 17:00 GMT, February Comex gold futures are trading $1799.50, up $11.70 or +0.65%. The SPDR Gold Shares ETF (GLD) is at $166.55, up $1.20 or +0.73%.

Gold traders are also monitoring the movement in U.S. Treasury yields. Bullion could be pressured late in the session if they finish strong.

In economic news, U.S. business activity contracted further in December as new orders slumped to the lowest level in just over 2-1/2 years, but softening demand helped to significantly cool inflation.

The survey’s flash manufacturing PMI dropped to a 31-month low of 46.2 in December from 47.7 in November. Economists had forecast the index holding steady at 47.7. The survey’s flash services sector PMI declined to 44.4 from 46.2 in November in November.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.  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 minor trend is down. This is controlling the momentum.

The short-term range is $1733.50 to $1836.90. Its pivot at $1785.20 stopped the selling earlier today.

On the upside, the nearest resistance is a long-term Fibonacci level at $1804.30. On the downside, additional support is a long-term 50% level at $1771.50.

Daily Swing Chart Technical Forecast

Trader reaction to the Fibonacci level at $1804.30 is likely to determine the direction of the February Comex gold futures contract into the close on Friday.

Bullish Scenario

A sustained move over $1804.30 will indicate the buying is getting stronger. If this creates enough momentum then look for a surge to the upside with the weekly high at $1836.90 the next likely target.

Bearish Scenario

A sustained move under $1804.30 will signal the presence of sellers. This could lead to a retest of $1785.20. If it fails then look for the selling to possibly extend into the minor bottom at $1778.10, followed by a 50% level at $1771.50.