- Gold price is sideways below $2020.00 as investors await the US debt-ceiling talks’ outcome for further action.
- US President Joe Biden aims for closing the argument with approval for a higher borrowing cap without impacting spending initiatives’ budget.
- Gold price is forming a volatility contraction pattern around $2,020.00, which indicates a back-and-forth action.
Gold price (XAU/USD) is continuously delivering a sideways performance as investors are looking for potential cues for decisive action. The precious is showing sideways auction below $2,020.00 ahead of the outcome of United States debt-ceiling talks between Republican leaders and the White House.
Postponed Friday’s meeting is scheduled for Tuesday and a volatile action in the FX domain cannot be ruled out. No doubt, US President Joe Biden will work on closing the argument with approval for a higher borrowing cap for the US Treasury without surrendering budget’ spending initiatives. However, House of Representatives Joseph McCarthy would also attempt for reducing spending to avoid further budget deficits.
The US President is highly needed to raise debt-ceiling to avoid default on obligated payments as it would harm the United States leadership positions and the economy’s credibility.
S&P500 futures have reported some losses in Asia as investors are worried about the scenario if the debt-ceiling negotiations conclude without a meaningful outcome. The US Dollar Index (DXY) has retreated after a recovery attempt below 102.40. Going forward, US Retail Sales data will also remain in the limelight as it would provide more clarity on monetary policy guidance. Largely, the Federal Reserve (Fed) is expected to keep the interest rate policy steady in June’s monetary policy meeting.
Gold technical analysis
Gold price is forming a volatility contraction pattern around $2,020.00 on an hourly scale, which indicates a back-and-forth action. However, an explosion in the same results in wide ticks and heavy volume. The downward-sloping trendline plotted from all-time highs at May 03 high at $2,079.78 is acting as a barricade for the Gold bulls.
The 200-period Exponential Moving Average (EMA) at $2,018.68 is straight, indicating a lackluster move ahead.
Also, the Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00, which indicates that investors await a fresh trigger for further action.
Gold hourly chart
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Recent news of US debt-ceiling problems have weighed heavily on the gold price, causing it to remain lackluster below $2,020. As such, many analysts have been watching the situation closely in order to forecast the future of gold prices.
The US debt-ceiling issues relate to how the federal government manages its debt. Specifically, the federal government must raise the debt limit in order to borrow more money so that it can pay existing obligations and enact new spending programs. However, if not enough funds are raised, it could lead to a debt crisis and potentially a recession.
As of now, the US debt-ceiling remains a point of contention between Congress and the White House, making it difficult for government officials to reach an agreement on how to proceed. As a result, gold prices have remained relatively subdued in the face of mounting uncertainty.
Though gold is often perceived as a safe haven investment in times of economic turmoil, it appears that the current US debt-ceiling issues have yet to push investors to the metal. That said, analysts believe that should the debt limit issue be addressed swiftly and amicably, gold prices could rebound sharply.
Meanwhile, economic indicators have yet to be reassuring of a robust recovery in the near term. With consumer sentiment dipping in the US and beyond, there is persisting worry that the economy may not be strong enough to sustain higher gold prices. Thus, some analysts suggest that long-term gold price forecasts remain cautious until the debt-ceiling situation resolves.
As analysts closely monitor the developments of the US debt-ceiling situation and consumer sentiment, gold prices are likely to remain at or below $2,020 in the near term. In the absence of a swift resolution, the future of gold prices is uncertain.