Gold Price Forecast XAU/USD – Closes Lower after Hawkish Fed Officials Drive Dollar Higher

Gold futures closed lower on Monday in a volatile session that saw the market hit a more than one-week high before posting a dramatic reversal to the downside. A wicked two-sided trade in the U.S. Dollar was primarily responsible for gold’s wild price swings. Those moves were manipulated by impulsive action in the U.S. Treasury bond market.

On Monday, February Comex gold futures settled at $1755.30, down $13.50 or -0.76%. The SPDR Gold Shares ETF (GLD) finished at $161.95, down $1.27 or -0.78%.

The U.S. Dollar turned positive after falling to a near two-week low earlier in the session. A stronger greenback tends to make dollar denominated gold more expensive to foreign buyers.

The dollar was driven higher after Fed Presidents James Bullard and John Williams stated that there was a long way to go to fight inflation, with Bullard stating that rates should be held high “throughout next year and into 2024.”

Gold tends to be highly sensitive to rising U.S. interest rates as they increase the opportunity cost of holding non-yielding bullion.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1778.50 will reaffirm the uptrend. A move through $1733.50 will change the main trend to down.

The long-term range is $1910.60 to $1632.40. Its retracement zone at $1771.50 to $1804.30 is resistance. It essentially stopped the rally at $1806.00 on November 15 and at $1778.50 on Monday.

The minor range is $1733.50 to $1778.50. The market tested its pivot at $1756.00 on Monday.

The short-term range is $1632.40 to $1806.00. If the main trend changes to down then its retracement zone at $1719.20 – $1698.70 will become the primary downside target area.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at $1756.00 is likely to determine the direction of the February Comex gold futures contract early Tuesday.

Bullish Scenario

A sustained move over $1756.00 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into $1771.50. Sellers could come in on the first test of this level, but overcoming it could lead to a test of $1778.50.

The minor top at $1778.50 is a potential trigger point for an acceleration into the resistance cluster at $1804.30 – $1806.00.

Bearish Scenario

A sustained move under $1756.00 will signal the presence of sellers. This could trigger a steep break into the main bottom at $1733.50.

If $1733.50 fails then the main trend will change to down with $1719.20 to $1698.70 the next key target area.