Gold extending its retreat from a seven-week low reached last Thursday. This decline comes as the US Dollar seems unaffected by sluggish yields and the absence of a deal on the debt ceiling. However, there are hopes that US policymakers will manage to avoid default, and hawkish talks from the Federal Reserve are providing some support to the US Dollar Index while putting pressure on XAU/USD.
While monthly PMIs may entertain Gold traders, the primary focus will be on the risk catalysts that could potentially impact the market. Currently, Gold is trading near an intraday low of approximately $1,961, facing the headwinds of a stronger US Dollar. The upcoming release of Purchasing Managers Indexes for May from major economies, including the US, adds to the pressure on Gold.
Meanwhile, the US Dollar Index continues to grind higher around 103.30, maintaining a two-day uptrend. This upward movement persists despite the failure of US President Joe Biden and House Speaker Kevin McCarthy to reach a deal on the debt ceiling during their latest negotiations. The greenback's ascent could be attributed to policymakers' optimism regarding an agreement to avoid a US default. However, McCarthy mentioned that the meeting with Biden was productive but did not result in a debt ceiling deal.
Furthermore, the increasing likelihood of a 0.25% rate hike by the Federal Reserve in June, coupled with expectations of no rate cuts in 2023, is providing additional support to the US Dollar's recent rise. Consequently, this exerts downward pressure on the price of Gold.
It is important to note that concerns over escalating tensions between the US and China, as well as uncertainties surrounding China's economic transition, are further weighing on XAU/USD. China's status as one of the largest consumers of Gold means that any negative developments for the country can impact the price of the precious metal.
In the midst of these market dynamics, S&P 500 Futures are showing a mild uptick near 4,220, marking the second consecutive day of gains after Friday's pullback from a nine-month high. The positive performance of US stock futures and the overall sentiment on Wall Street are causing the benchmark 10-year and two-year US Treasury bond yields to stabilize after a five-day uptrend, which saw them reach their highest levels in two months.
Given the cautiously optimistic atmosphere prevailing in the market, as well as the strength of the US Dollar, further downside movement for the Gold price is expected. However, the monthly PMIs, ongoing US debt ceiling negotiations, and the Federal Reserve's stance on interest rates could provide some support to the bearish bias.
From a technical analysis perspective, the Gold price has decisively broken a three-day ascending support line, which now serves as immediate resistance around $1,965. This break reinforces the bearish sentiment, particularly with bearish signals from the MACD. However, it's worth noting that the monthly low around $1,950 may prompt some buying activity, as the RSI indicator suggests oversold conditions.
In the event that the Gold price continues its bearish momentum below $1,950, sellers could be enticed by the late March swing low near $1,935.
On the upside, surpassing the immediate support-turned-resistance line near $1,965 does not guarantee an easy path for Gold buyers. The 100-hour moving average (HMA) poses a challenge near $1,974, along with a downward-sloping resistance line since May 11, currently around $1,977. If these hurdles are overcome, the next significant resistance level lies near $1,989, represented by a three-week descending resistance line.
Overall, the outlook for the Gold price suggests further downside movement, although the journey toward the $1,900
Hourly chart outlook
