Gold Price Faces Downward Pressure Amid US Debt Ceiling Concerns and Banking Apprehensions
The gold price is hovering around $2,010, seeking new influences to reverse a three-week decline, particularly after noting its first weekly drop in three weeks.
The GOLD price is hovering around $2,010, seeking new influences to reverse a three-week decline, particularly after noting its first weekly drop in three weeks. This price behavior reflects market unease due to worries about the US debt ceiling and banking sector uncertainties. However, a relatively uneventful calendar and mixed messages from the Federal Reserve (Fed) and US government officials are instigating the XAU/USD bears in the lead-up to this week’s key data/events.
Concerns about a potential US default in early June, unless the debt ceiling is adjusted, are weighing heavily on market sentiment and bolstering the US Dollar’s ascendancy. Concurrently, concerns about US banks, particularly those in the mid-tier range that reported significant decreases in share prices and deposits last week, are adding to the pressure.
Moreover, hawkish remarks from Fed officials are also imposing a burden on XAU/USD. Fed Governor Philip Jefferson and St. Louis Fed President James Bullard, for instance, defended the US central bank’s current monetary policy, citing heightened inflation as a primary hurdle. Similarly, Fed Governor Michelle Bowman stated that the “policy rate will need to remain sufficiently restrictive for some time.”
Recently, President Joe Biden indicated that postponed talks would be reconvened on Tuesday. This, along with US Treasury Secretary Wally Adeyemo’s comments describing debt-ceiling negotiations with the White House as “constructive,” challenges market pessimism and US Dollar bulls. As a result, while the gold price remains subdued, bearish investors have lately taken a pause.
Despite weaker US inflation indicators and disappointing data on other fronts, XAU/USD buyers remain unimpressed. For instance, preliminary results of the University of Michigan’s Consumer Confidence Index for May fell short of market expectations, dropping to 57.7 from a previous 63.5. Interestingly, one-year inflation expectations decreased slightly, while the five-year figure rose to its highest level since 2011.
Looking forward, Tuesday’s US debt ceiling discussions will be pivotal for gold traders in seeking immediate direction. Following that, US Retail Sales and a speech from Fed Chairman Jerome Powell will be closely monitored.
If US policymakers fail to extend the debt ceiling, gold prices could face additional downward pressure. Moreover, positive US data and hawkish comments from Powell could further strengthen the XAU/USD bears.
On the daily chart, GOLD price illustrates a bearish triangle formation, currently ranging between $2,050 and $1,990. The bearish hints from the Moving Average Convergence and Divergence (MACD) indicator, along with a steady Relative Strength Index (RSI) line at 14, also suggest further depreciation of the XAU/USD.
However, a decisive break below the $1,990 support level is necessary for GOLD prices to target around $1,875. If the price does breach $2,050, it would contradict the bearish triangle formation, possibly leading to a swift upsurge in XAU/USD towards the previous yearly high of approximately $2,070 and then to the latest record high near $2,080.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Related Articles
Save