Gold Price Forecast XAU/USD – Higher Finish as US Dollar, Yields Fall on Fed Slowdown Wagers

Gold futures were up sharply on Wednesday, supported by a plunge in Treasury yields and a retreat by the U.S. Dollar. The moves were fueled by the thought of slower Fed rate hikes at its policy meeting next week. As of the close, the odds of a 50 basis point rate hike sit at 74.7%, while the chances of a 75 basis point rate hike are at 25.3%.

On Wednesday, December Comex gold futures settled at $1798.00, up $15.60 or +0.87% and the SPDR Gold Shares ETF finished at $166.34, up $1.50 or +0.91%.

The benchmark U.S. 10-year Treasury yield dropped to a near three-month low, driving down demand for the U.S. Dollar, which fell a half a percent against a basket of currencies.

Lower yields tend to lower the opportunity cost of holding gold, which pay no interest. A weaker greenback tends to drive up foreign demand for dollar-denominated gold.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum could shift to the downside if $1778.10 fails as support.

A trade through $1822.90 will signal a resumption of the uptrend. A move through $1752.90 will change the main trend to down.

The nearest resistance is a long-term Fibonacci level at $1804.30. The nearest support is a pair of 50% levels at $1778.20 and $1771.50.

Daily Swing Chart Technical Forecast

Trader reaction to $1790.60 is likely to determine the direction of February Comex gold on Thursday.

Bullish Scenario

A sustained move over $1790.60 will indicate the presence of buyers. The first upside target is $1804.30. Overtaking this level will indicate the buying is getting stronger. This could trigger an acceleration into the minor top at $1822.90.

Bearish Scenario

A sustained move under $1790.60 will signal the presence of sellers. This could lead to a test of the support cluster at $1778.20 – $1771.50.

Look for a technical bounce on the first test of the support cluster. However, a failure to hold $1771.50 could trigger an acceleration into the main bottom at $1752.90.

Side Notes

Gold could tread water for several days until the Fed meets on Dec. 13-14. Looking ahead, if the Fed comes across as dovish by suggesting it may pause rate hikes because of recession fears, gold prices could soar another $100 over the near-term.