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Gold Highlights
- Dollar strength limits gains, impacting gold prices
- Frustration in markets may increase demand for gold
- U.S. debt negotiations create volatility and uncertainty in thegold market/strong>
Gold Overview
Gold (XAU) prices remained steady on Wednesday as the strength of the dollar limited gains. Investors were concerned about the ongoing negotiations regarding the U.S. debt limit, which made the safe-haven dollar more attractive compared to gold. This situation has created downward pressure on gold prices, as it reduced the appeal of gold as a safe-haven asset.
At 08:23 GMT, Gold (XAU) is trading $1987.09, down $2.69 or -0.14%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $184.88, down $2.33 or -1.25%.
Gold Finds Support Amidst Challenges
Despite these challenges, whenever the price of gold dipped below $2,000, it received support from buyers. The prolonged debt ceiling process has created frustration in the market, which has negatively affected sentiment. This frustration could potentially lead to an increase in demand for gold as investors seek a reliable store of value during uncertain times.
Progress Made to Avoid Debt Default
President Joe Biden and congressional Republican Kevin McCarthy have been making progress in avoiding a U.S. debt default. The potential economic consequences of a default prompted Biden to cut short his trip to Asia. Investors closely monitor these developments as they could bring clarity and reduce uncertainty in the market, potentially impacting gold prices.
Positive Data, Hawkish Fed
Recent events, such as positive U.S. retail sales data and hawkish remarks from Federal Reserve officials, have raised expectations of delayed interest rate cuts. Higher interest rates make non-yielding assets like gold less attractive. Consequently, these expectations have put downward pressure on gold prices.
Moreover, if Federal Reserve officials express concerns about inflation leading up to the June meeting, it would negatively impact the price of gold. Additionally, the current strength of the dollar has limited the potential for gold prices to rise in the short term.
Fed to Hold Rates Steady in June
Traders in the market are currently estimating a 78.6% chance that the U.S. central bank will maintain interest rates in June, according to the CME FedWatch tool. This indicates cautious sentiment among investors and the belief that interest rates will remain unchanged for now, which could have an impact on the performance of gold.
Debt Resolution to Set Near-Term Tone
It is important to note that once the debt crisis is resolved, there may be a temporary period of selling in gold. However, in the event of a default, the uncertainty surrounding the situation makes it difficult to predict how much gold prices could increase. These factors contribute to the volatility and uncertainty in thegold marketrelated to the ongoing debt negotiations.
Technical Analysis
Gold (XAU) is trading on the bearish side of the pivot at $2002.54, putting it in a weak position.
The failure to hold $2002.54 should lead to increased selling pressure. If this generates enough downside momentum then look for the selling to possibly extend into (S1) at $1956.30 over the near-term.
Regaining $2002.54 will indicate the return of buyers. The first upside target is (R1) at $2035.78. Overtaking this level will indicate the buying is getting stronger with the next major target (R2) at $2082.03.
| S1 – $1956.30 | R1 – $2035.78 |
| S2 – $1923.06 | R2 – $2082.03 |
| S3 – $1876.81 | R3 – $2115.26 |
This article was originally posted on FX Empire
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