Gold Price Forecast XAU/USD – Traders Rattled as Hot Economic Data Creates Uncertainty Over Fed Policy

Gold futures were hit hard on Monday after touching a multi-month high the previous session. The steep sell-off helped produce a potentially bearish closing price reversal top. The chart pattern doesn’t indicate a change in trend is taking place, but if confirmed, it could shift momentum to the downside.

On Monday, February Comex gold futures settled at $1783.70, up $2.40 or +0.13%. The SPDR Gold Shares ETF (GLD) settled at $164.41, down $2.85 or -1.70%.

Buyers were rattled by hotter-than-expected U.S. economic data that created more confusion over Fed policy. On Monday, U.S. services industry activity unexpectedly exceeded expectations in November. This combined with Friday’s robust employment numbers, is offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year.

The data is creating uncertainty over future Fed policy and that is making gold buyers nervous. The Fed is likely to raise rates 50 basis points when it meets next week, but the big worry for gold traders is when will it stop raising rates and at what level.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1822.90 will reaffirm the uptrend. A move through $1752.90 will change the main trend to down.

The market formed a closing price reversal top on Monday. A trade through $1776.10 will confirm the chart pattern. This could trigger the start of a 2-3 day correction.

On the upside, the resistance is a long-term Fibonacci level at $1804.30 and a long-term 50% level at $1861.30.

On the downside, a minor pivot at $1778.20 is the first support, followed by a long-term 50% level at $1771.50.

The short-term range is $1632.40 to $1822.90. If the main trend changes to down then look for a break into its retracement zone at $1727.70 – $1705.20.

Daily Swing Chart Technical Forecast

Trader reaction to $1778.20 is likely to determine the direction of the February Comex gold futures contract early Tuesday.

Bullish Scenario

A sustained move over $1778.20 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $1804.30. Overtaking this level will mean the buying is getting stronger. This could lead to a retest of $1822.90.

Bearish Scenario

A sustained move under $1778.20 will signal the presence of sellers. This should lead to a quick test of $1771.50. Taking out this level will indicate the selling pressure is getting stronger with the main bottom at $1752.90 the next target. Taking out this level will change the main trend to down.

Side Notes

Our work suggests that $1727.70 to $1705.20 is the major value zone and primary downside target.