Gold Price Analysis: XAU/USD Sees Mild Losses Amid Cautious Market Sentiment and Uncertain US Debt Ceiling Talks

The price of gold (XAU/USD) experienced slight declines as trading kicked off on Tuesday, influenced by a cautious market outlook and mixed updates from the United States.

Arslan Butt•Tuesday, May 16, 2023•2 min read

The price of GOLD (XAU/USD) experienced slight declines as trading kicked off on Tuesday, influenced by a cautious market outlook and mixed updates from the United States. Furthermore, uncertainties surrounding the US debt ceiling talks scheduled for 19:00 GMT added to the lack of clarity.

Despite the recent retreat, GOLD remains resilient after breaking a two-week uptrend. The weakened US Dollar and hopes for increased demand from China, a significant consumer of XAU/USD, continue to support the precious metal. Additionally, the rescheduling of US debt ceiling negotiations, following their postponement on Friday, provides further backing for gold prices.

On the other hand, the United States NY Empire State Manufacturing Index reported a decline to its lowest level since April 2020, at -31.8 for May. Mixed comments from Federal Reserve (Fed) officials also weighed on the US Dollar. Atlanta Fed President Raphael Bostic expressed a positive outlook on inflation, hinting at potential rate hikes, while Chicago Federal Reserve Bank President Austan Goolsbee and Minneapolis Fed President Neel Kashkari emphasized the impact of future rate increases.

Meanwhile, the People’s Bank of China’s optimistic stance and the release of its quarterly economic report, highlighting the absence of deflation and predicting a sharp rebound in economic growth, supported the upward trajectory of gold prices.

Amid pre-data anxiety and concerns over the US debt ceiling talks, the cautious market sentiment has weighed on XAU/USD. House Speaker Kevin McCarthy’s recent comments expressing concern over the situation have added to fears of a potential deadlock and a US default.

GOLD traders will closely monitor key economic statistics from China and the US, along with the US debt ceiling talks. Positive surprises from US policymakers could fuel a rally in gold prices.

From a technical perspective, gold’s price has approached the lower trendline of a two-month bullish channel. With the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators showing sluggish signals, a gradual decline is anticipated. The $2005 support level, reinforced by the 200-day Simple Moving Average (SMA), will be a crucial level for XAU/USD bears to breach. Further downside movement may target the $2,000 psychological level, followed by the mid-April swing low near $1,970.

On the upside, a descending resistance line, currently around $2,027, acts as a short-term hurdle for gold’s recovery. The previous monthly high near $2,048 may also impede further upward movement before reaching the recently established record high around $2,080. Additionally, the upper boundary of the bullish channel, situated near $2,098, and the $2,100 round figure mark subsequent challenges for gold buyers.

Overall, the outlook for gold suggests a potential upward grind unless the $2,000 support level is decisively breached.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.