Gold Price Forecast XAU/USD – Stronger US Economic Growth Weighs on Demand for Bullion

Gold futures are trading sharply lower late in the session on Thursday after stronger than expected economic data showed the economy bounced back from a contraction faster than previously expected. Additionally, another report pointed to a still-tight labor market.

Treasury yields firmed on the news, pushing up the U.S. Dollar and likely greenlighting the Federal Reserve to continue its aggressive rate hike path.

Demand for non-yielding, dollar-denominated gold tends to weaken when interest rates rise and the greenback strengthens.

At 19:00 GMT, February Comex gold is trading $1795.80, down $29.60 or -1.62%. The SPDR Gold Shares ETF (GLD) is at $166.37, down $2.43 or -1.44%.

GDP Rebounds Faster than Previously Estimated in Third Quarter

Gross domestic product increased at a 3.2% annualized rate last quarter, the government said in its third estimate of GDP. That was revised up from the 2.9% pace reported that month. The economy had contracted at a 0.6% rate in the second quarter.

Jobless Claims increased Less than Expected

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 216,000 for the week ended December 17, leaving the bulk of the prior week’s decline intact, Labor Department data showed on Thursday. Economists polled by Reuters had forecast 222,000 claims for the latest week.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. 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 also up. A move through $1782.00 will change the minor trend to down. This will shift momentum to the downside.

On Thursday, the market crossed to the weak side of Fibonacci level at $1804.30, making it resistance. The nearest support is a pair of 50% levels at $1785.20 and $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 Thursday.

Bearish Scenario

A sustained move under $1804.30 will indicate the presence of sellers. This could lead to a labored break into a series of support levels including the 50% level at $1785.20, the minor bottoms at $1782.00 and $1778.10, and the 50% level at $1771.50. The latter is a potential trigger point for an acceleration to the downside with the next target a support cluster at $1734.70 – $1733.50.

Bullish Scenario

A sustained move over $1804.30 will signal the presence of late session buyers. If this creates enough upside momentum then look for a possible short-covering rally into $1833.80 – $1836.90.