Early in the European session, Gold (XAU/USD) is trading around 1,975.94. At the opening of this week's trading, gold opened around 1,984 and made a new high reaching 1,990.67. Gold is currently making a technical correction and it could reach the pivot point area of around 1,961 in the next few hours.
Gold could suffer a strong technical correction in the next few hours and it could fall towards the support zone of 1,961. The 21 SMA on the 1-hour chart and the weekly high of January 29 coincide at this level.
The Federal Reserve will announce its decision on Wednesday. A rate hike of 0.25% is widely expected. If the Fed raises interest rates above this level, this policy move is likely to cause a sharp fall in the gold price and it could cover the gap left last week at around 1,865. Conversely, if the Fed makes the decision as expected by analysts, gold could resume its bullish cycle and surpass the psychological level of $2,000.
In the next few hours, we expect gold to fall towards the support zone of 1,961- 1,958 which could give us an opportunity to buy with targets at 1,975 and 1,990. On the other hand, if it returns to 1,985 levels, it could be considered a signal to sell because the 4-hour chart is showing extremely overbought signals.
