Gold Price Forecast XAU/USD – Profit-Taking Shifts Momentum to Downside
Gold futures closed lower on Tuesday after another test of an eight-month high failed to draw enough buyers to sustain the move.
Buyers supported the market on hopes that the U.S. Federal Reserve would adopt a less aggressive approach to rate hikes going forward.
Meanwhile, helping to put a lid on prices and encourage profit-taking were higher Treasury yields and a firm U.S. Dollar.
On Tuesday, February Comex gold futures settled at $1909.90, down $8.40 or -0.44%. The SPDR Gold Shares ETF finished at $177.58, down $1.18 or -0.66%.
A short-term pullback in gold prices could be in the cards since traders have already priced in a smaller-than-usual rate hike by the Fed at its Jan. 31 – Feb. 1 policy meeting. At the close, traders were expecting 90.6% odds of a 25 basis point rate hike from the Fed and see rates peaking at 4.94% in June, while most Fed officials see rates landing north of 5% into the next year.
Nonetheless, gold is likely to remain underpinned as long as the U.S. Dollar remains weak and inflation continues to fall at a slow pace.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. However, momentum is now trending lower, following the confirmation of Monday’s closing price reversal top.
A trade through $1931.80 will negate the chart pattern and signal a resumption of the uptrend. A move through $1733.50 will change the main trend to down.
The minor trend is also up. A trade through $1829.90 will change the minor trend to down. This will confirm the shift in momentum.
The market closed on the weak side of a long-term Fibonacci level at $1915.30, making it resistance. The nearest support is a minor 50% level at $1880.90, followed by a short-term 50% level at $1861.30.
Daily Swing Chart Technical Forecast
Trader reaction to the long-term Fibonacci level at $1915.30 is likely to determine the direction of February Comex gold early Wednesday.
A sustained move under $1915.30 will indicate the presence of sellers. If this creates enough downside momentum early in the session then look for the selling to possibly extend into the minor pivot at $1880.90.
A sustained move over $1915.30 will signal the presence of buyers. Taking out the minor top at $1931.80 will indicate the buying is getting stronger. This could trigger the start of an eventual rally into the April 18, 2022 main top at $2030.00.