Gold Price Continues Downtrend Amid US Dollar Index Strength and Debt-Ceiling Uncertainty

Posted Thursday, May 25, 2023 by
Arslan Butt • 1 min read

The GOLD price (XAU/USD) has slipped below the $1,960.00 level during the Asian session, facing downward pressure as the US Dollar Index (DXY) aims to reach a 10-week high of 104.00. The strength of the USD Index is fueled by ongoing uncertainty surrounding US debt-ceiling negotiations between the White House and Republican leaders.

Meanwhile, S&P500 futures are maintaining significant gains in the Asian session, with US equities showing resilience after weak cues observed on Wednesday. The USD Index has reached its daily high at 103.92, driven by mounting concerns over the US borrowing cap.

Delays in resolving the US debt-ceiling issue are attributed to House of Representatives Kevin McCarthy’s refusal to support additional taxes for the wealthy and higher budget spending. However, McCarthy remains optimistic about reaching a bipartisan agreement.

Despite dovish cues on interest rate guidance from the Federal Open Market Committee (FOMC) minutes, the gold price has failed to capitalize on them. Fed policymakers view the likelihood of a June rate hike as “less certain” due to potential banking concerns.

Traders will closely monitor the upcoming US Durable Goods Orders data, which is expected to show a contraction of 1.0% compared to a previous expansion of 3.2%.

Technical Outlook for Gold

After testing the 1977.25 level in previous sessions, GOLD prices experienced a strong downward bounce, approaching the first target at 1945.20. This level represents the 50% Fibonacci correction level for the upward move from 1809.35 to 2081.05. Breaking this level could trigger further bearish correction with the next target at 1913.15.

Consequently, the bearish outlook for gold remains valid, awaiting negative momentum to push the price towards the suggested targets. It is important for gold to remain below 1977.25 to sustain the anticipated decline.

The expected trading range for today is between support at 1940.00 and resistance at 1970.00.

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