Gold Price struggles for direction as market uncertainty persists
The Gold Price (XAU/USD) continues to experience a lack of clear direction as it hovers near a short-term support line, testing the market's indecision. The current price action reflects mixed signals surrounding the ongoing talks regarding the extension of the US debt limit and the stance of the US Federal Reserve (Fed). Additionally, cautious sentiment prevails ahead of the release of mid-tier data from the US.
One factor contributing to the uncertainty is the inability of US policymakers to reach a consensus on the debt ceiling extension, creating concerns about a potential default. The situation is further exacerbated by the approaching long weekend for the House Representatives. This has led global rating agencies like Fitch and Moody's to adopt a cautious stance on the US credit rating status, a sentiment that has been acknowledged by the US Treasury Department.
Meanwhile, the recently published minutes of the Federal Open Market Committee (FOMC) Meeting reveal a divided opinion among policymakers regarding the most recent 0.25% rate hike by the US central bank. The market's expectations of an additional rate hike in June have also been called into question. Despite this, Atlanta Fed President Raphael Bostic has expressed the view that the country is only beginning to face the challenges of controlling inflation. Similarly, Federal Reserve Governor Christopher Waller has emphasized that he does not support halting rate hikes unless there is clear evidence of inflation moving towards the 2% objective.
The market is also grappling with conflicting factors on the global stage. On one hand, expectations of further easing measures from China, driven by record-high interbank Repo turnover, provide some support to the Gold price. On the other hand, geopolitical concerns act as a headwind, creating a tug-of-war effect on the price.
In terms of market sentiment, the S&P500 Futures have managed to rebound from a two-week low, indicating a potential shift in direction. Simultaneously, US Treasury bond yields, particularly the 10-year and two-year yields, remain firm at levels not seen since mid-March, hovering around 3.75% and 4.40%, respectively.
Looking ahead, market participants will closely monitor the upcoming US weekly Jobless Claims, the Chicago Fed National Activity Index, and Pending Home Sales data. However, the outcome of the debt ceiling talks will hold significant importance in determining clearer market directions.
H4 chart outlook:
Technical analysis:
Technical analysis reveals that the Gold price is currently testing a one-week ascending support line near $1,955. It remains confined within a short-term trading range established since May 16, with upper and lower boundaries at $1,985 and $1,951, respectively.
Notably, the formation of a bullish cross on the MACD indicator and the RSI (14) remaining below 50 suggest potential support for buyers in the XAU/USD market.
However, immediate upside movements could face resistance from a falling trend line that has been in place for the past two weeks, located around $1,977. Additionally, the 200-Hour Moving Average (HMA) near $1,981 acts as another potential obstacle.
It is worth monitoring the price levels of the late March swing low around $1,934 and the psychological threshold of $2,000, as they could serve as significant price levels for the Gold market. Overall, Gold prices are currently consolidating recent gains amidst a sluggish market, with bearish sentiment persisting.