The gold market is nursing losses around six-week lows near $1,950 early Friday. As the US Dollar (USD) rally takes a pause. As investors await fresh details on the US debt limit problem and US Federal Reserve (Fed) Chair Jerome Powell’s speech later in the day.
The US dollar is strong, with all eyes on Fed Chair Powell.
Despite fresh optimism about a potential US debt ceiling resolution coming sooner. As suggested by US President Joe Biden and House Speaker Kevin McCarthy. The US Dollar rose for the third day in a row on Thursday. A debt ceiling agreement would mean that the United States will avoid a default and, as a result, a recession.
This market respite resulted into consistent gains for the US Dollar. Which was aided by the rise in US Treasury bond rates across the yield curve. As a result, the gold price came under severe selling pressure and broke. Through critical support levels to test the psychological threshold of $1,950. Hitting new six-week lows.
Positive weekly jobless claims data from the United States also supported the US Dollar gain. As initial claims decreased by 22,000 to 242,000 in the week ending May 13. The largest reduction since 2021. Continuing claims fell to 1.8 million in the week ending May 6.
Furthermore, the bulls hailed hawkish comments from a host of Federal Reserve leaders. Dallas Fed President Lorie Logan stated that current evidence does not warrant deferring an interest rate rise until the June meeting. Fed Chairman Philip Jefferson stated that Inflation remains too high. Despite the fact that St Louis Fed President James Bullard has argued for higher interest rates once again. Claiming that they provide insurance against inflation.
The US Dollar is holding its gains in the final trading session of the week. Allowing bulls to take a break before the next upsurge. The market attitude is cautious as new US-China tensions over Taiwan surface. In a statement issued late Thursday.
The US Trade Representative’s (USTR) office stated that “the US and Taiwan reached agreement on the first part of their ’21st Century’ trade initiative. Covering customs and border procedures, regulatory practices, and small business.” The US-Taiwan deal clouded the prospects for a Chinese business official’s visit to the US next week. Impacting on investors’ mood.
Reuters reported this week that “the small but powerful Republican faction warned this week. That they could try to block any agreement to raise the $31.4 trillion debt ceiling from passing the House of Representatives. If the accord does not contain ‘robust’ federal spending cuts.” Dimming the market’s optimism about a possible debt ceiling deal by Sunday. When Biden and McCarthy resume talks.
Looking forward, even if risk aversion gains traction, the US currency tends to strengthen. Making any return by gold purchasers unlikely. However, Federal Reserve Chairman Jerome Powell’s speech. US debt ceiling updates, and end-of-week flows will all have a significant impact on gold prices.
Gold Technical Outlook
Gold Price finished the day below the positive 50-Daily Moving Average (DMA) support, ending at $1,985 on Thursday. The latter’s downward breach ignited a new selling wave in gold, as sellers tested the important $1,950 demand region.
Gold is trying a dead cat bounce at the time of writing, with the 14-day Relative Strength Index (RSI) showing indications of recovery. However, with the RSI remains below the midpoint, any rebound efforts are likely to be sold into.
Immediate resistance may be found at the previous static support near $1,975, above which the 50 DMA barrier, currently at $1,987, will be tested. Acceptance over the latter is required in order to recoup the $2,000 threshold.
Alternatively, a weekly closing value less than the Gold bulls will be doomed if the psychological threshold of $1,950 is breached, clearing the way for a test of the $1,900 round level.
Gold buyers may benefit from the March 21 and 22 low at $1,935 before sellers hit the positive 100 DMA support at $1,929.
