Gold Price Forecast XAU/USD – Surges to Six-Month High on Weaker US Dollar

Gold futures jumped to a six month high on Tuesday before closing higher for the session. The rally was fueled by a weaker U.S. Dollar, but gains were capped by higher U.S. Treasury yields. The catalyst behind the move was optimism surrounding decisions by top consumer China to further ease COVID-19 restrictions.

On Tuesday, February Comex gold futures settled at $1823.10, up $18.90 or +1.04%. The SPDR Gold Shares ETF (GLD) finished at $168.65, up $1.39 or +0.83%.

The initial rally in gold was impressive, but the settlement wasn’t. If volume had been average to better, the breakout to the upside would’ve been stronger. Nonetheless, we did learn that traders like the long side even at current price levels, but in order to sustain the move, the dollar is going to have to weaken along with Treasury yields.

As long as yields are rising, gold traders are going to remain cautious about buying strength.

Daily Swing Chart Technical Analysis

The main trend is up. The uptrend was reaffirmed on Tuesday when buyers too out the previous high at $1836.90. A trade through $1841.90 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 trade through $1792.70 will change the minor trend to down. This will also shift momentum to the downside.

The nearest resistance is a long-term 50% level at $1861.30, followed by $1915.30. The closest support is $1804.30, followed by a pair of 50% levels at $1787.70 and $1771.50.

Daily Swing Chart Technical Forecast

Trader reaction to $1825.00 is likely to determine the direction of the February Comex gold futures contract early Wednesday.

Bullish Scenario

A sustained move over $1825.50 will indicate the presence of buyers. This could lead to a retest of yesterday’s high at $1841.90. A trade through this level could trigger a surge into the long-term 50% level at $1861.30.

Bearish Scenario

A sustained move under $1825.50 will signal the presence of sellers. This could lead to a labored break with potential support levels at $1804.30, $1787.70 and $1771.50.

Sidelines

Continue to monitor the movement in the U.S. Dollar and Treasury yields for direction.