Gold Price Forecast XAU/USD – Tight Range, Low Volume Amid Fed Rate Path Worries

Gold futures finished slightly better on Tuesday after failing to follow-through to the downside after posting a dramatic closing price reversal top the previous session. The limited price action reflected mixed results by U.S. Treasury yields and the U.S. Dollar.

Uncertainty over Fed policy may be making traders nervous, encouraging established longs to trim positions and discouraging new investors from initiating fresh positions.

On Tuesday, February Comex gold futures settled at $1782.40, up $1.10 or +0.06%. The SPDR Gold Shares ETF (GLD) closed at $164.86, up $0.47 or +0.29%.

We’re expecting light volume over the next couple of sessions with Federal Reserve members inside the blackout period and no major reports until Friday’s producer price index data.

The price action could go two ways, however. Prices could sit in a range, or the thin trading conditions could trigger a steep correction. I think there is enough uncertainty to limit the upside action.

Daily Swing Chart Technical Analysis

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

A trade through $1822.90 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $1778.10 will confirm the chart pattern. It won’t change the trend to down, but it could trigger the start of a 2 to 3 day correction.

A trade through $1752.90 will change the main trend to down.

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

Daily Swing Chart Technical Forecast

Trader reaction to the pair of 50% levels at $1778.20 and $1771.50 is likely to determine the direction of the February Comex gold futures contract on Wednesday.

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. Overcoming this level will indicate the buying is getting stronger with the next target the reversal top at $1822.90.

Bearish Scenario

A sustained move under $1771.50 will signal the presence of sellers. This could trigger a sharp break into the main bottom at $1752.90. Taking out this level will change the main trend to down and could trigger a break into another main bottom at $1733.50.

The major downside target is the retracement zone at $1727.70 – $1705.20. This is also a value area. We’re looking for buyers to come in on the first test of this area.