Gold Price Forecast XAU/USD – Weak Close Tied to Fed Rate Hike Fears after Hot Jobs Report

Gold futures finished lower on Friday after hitting a four-month high early in the session. Prices rose shortly before the release of the November Non-Farm Payrolls report on the back of less-hawkish comments from Fed Chair Jerome Powell earlier in the week. Powell said the Fed could start lowering rates in December.

But the jobs report raised doubts over whether the Fed can afford to change its aggressive monetary policy tightening, encouraging investors to book profits and driving prices lower into the close.

On Friday, February Comex gold futures settled at $1809.60, down $5.60 or -0.31%. This is down from an intraday high of $1818.70. Additionally, the SPDR Gold Shares ETF (GLD) finished at $167.29, down $0.55 or -0.33%.

Gold Traders Fear Fed May Have to Raise Rates Longer

Data from the U.S. Labor Department showed U.S. employers hired more workers than expected in November and raised wages at a faster clip than forecast. Ahead of the report, financial futures traders had priced in a 91% chance of a 50 basis point rate hike. This dropped to 78.2% after the jobs report, while odds of a 75 basis point rate hike increased.

Gold traders fear the Fed could raise rates higher over the long-run. This notion was supported by a Fed official. Chicago Fed President Charles Evans stated at an event that there could be “a slightly higher peak rate of the funds rate, even as we likely will step down: the pace of rate hikes from 75 bpd.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside, following Friday’s closing price reversal top.

A trade through $1791.80 will confirm the potentially bearish chart pattern and could trigger the start of a 2-3 day counter-trend sell-off. A trade through $1818.70 will negate the chart pattern and signal a resumption of the uptrend.

The first support is a Fibonacci level at $1804.30. This is followed by a minor pivot at $1785.80 and a 50% level at $1771.50.

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

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 early Monday.

Bullish Scenario

A sustained move over $1804.30 will indicate the presence of buyers. This could lead to a test of $1818.70. Taking out this level could trigger an acceleration into the main top at $1836.70. A drive through this level could lead to a near-term test of the long-term 50% level at $1861.30.

Bearish Scenario

A sustained move under $1804.30 will signal the presence of sellers. The first downside target is the pivot at $1785.80, followed by the 50% level at $1771.50. This is a potential trigger point for an acceleration to the downside with $1725.60 to $1703.60 the next major target zone.