Gold Price Clings to Modest Gains Amid Mixed Sentiment and US Dollar Struggles

The price of GOLD (XAU/USD) is holding onto slight gains around $1,985 after hitting its lowest levels in three weeks, putting an end to a two-day downtrend. The yellow metal is benefiting from the US Dollar’s struggle to extend its recent upward movement from multi-day highs, as sentiment remains mixed due to concerns about default conditions and potential easing in US retail sales.

US President Joe Biden and House Speaker Kevin McCarthy have managed to reassure the markets that they will work together to avoid a “catastrophic” default, boosting risk sentiment and driving the US Dollar higher. The greenback’s strength is also supported by mostly positive US data and hawkish comments from the Federal Reserve.

However, cautiousness prevails due to the approaching US debt ceiling expiry in early June and doubts about diplomats’ ability to reach a deal on multiple issues related to the debt-limit problem. These factors weigh on sentiment and the US Dollar.

Additionally, concerns about easing US economic data have emerged, with reports indicating that while retail sales have remained resilient despite higher prices, consumers have become more cautious with their spending. This has had an impact on companies like Target and Home Depot, which primarily offer discretionary products. The dovish stance of the Federal Reserve also contributes to the weakening of the US Dollar.

Amidst these developments, buyers of the US Dollar Index (DXY) are struggling to maintain control near seven-week highs, hovering around 102.85-80. The S&P500 Futures show minor losses despite a positive close on Wall Street, while US Treasury bond yields remain stable near multi-day highs.

Looking ahead, with no major data or events in sight, the direction of the gold price will likely be influenced by risk factors and market catalysts.