Price Surges to $2,000 as Investors Anticipate Neutral Fed Stance and Debt Ceiling Talks Intensify

GOLD price (XAU/USD) has successfully extended its recovery well above the crucial $2,000.00 resistance level during the Asian session. The precious metal is gaining traction above $2,000.00 as investors expect the Federal Reserve (Fed) to maintain a neutral stance on interest rate guidance during its May monetary policy meeting, following back-to-back 25 basis point (bp) interest rate hikes.

Another contributing factor to the rising GOLD price is the ongoing US debt ceiling negotiations. As political drama unfolds over increasing the debt ceiling, a higher debt-ceiling proposal may prompt credit rating agencies to downgrade the United States’ long-term credit rating, potentially negatively impacting the US Dollar and US equities. Consequently, gold’s appeal as an investment is growing stronger.

The US Dollar Index (DXY) has experienced some buying interest after a gradual decline to around 101.35. Investors are bracing for substantial volatility in the USD Index ahead of the release of Q1 Gross Domestic Product (GDP) data. According to consensus, annualized GDP growth is anticipated to slow down to 2.0% from the previous rate of 2.6%.

On Wednesday, weaker core capital goods orders, resulting from higher interest rates imposed by the Federal Reserve (Fed), fueled concerns of an economic slowdown. Companies have delayed expansion plans due to increased interest expenses, which may lead Fed Chair Jerome Powell to consider adopting neutral guidance.

Gold Technical Analysis:

GOLD price is trading within a neutral triangle pattern, signaling a significant decrease in volatility. The ascending trendline drawn from the March 22 low at $1,934.34 offers support, while the upside is limited by the trendline extending from the April 17 high at $2,012.92. Now the focus will be on the upcoming US GDP data release that could put an end to gold’s lackluster performance.