Gold Price Forecast: Acceptance above $1,990 is critical for XAU/USD on road to recovery
|- Gold price holds rebound from six-week lows amid a cautious start to a busy week.
- US Dollar suffers from dovish Fed Chair Powell and uncertainty in the United States debt ceiling.
- Gold sellers could retain control whilst below the 50-Day Moving Average support-turned-resistance.
Gold price is consolidating Friday’s upswing below $1,990 amid a cautious start to a busy week ahead. The United States Dollar (USD) remains on the back foot as uncertainties US debt ceiling issue weigh. Investors will stay on the edge, as the weekend negotiations will likely continue on Monday.
United States debt ceiling talk in focus
Uncertainty over US talks to avoid a debt default cast a shadow over markets early Monday, as no outcome was reached over the weekend, with talks set to continue later in the day. Leaving the meeting in the early hours of Asia this Monday, Senior White House Adviser Steve Ricchetti, per Reuters, “We’ll keep working tonight". Meanwhile, US President Joe Biden said that his discussion with House Speaker Kevin McCarthy ‘went well.”
On Sunday evening, staff members from both sides reconvened at US House Republican Speaker Kevin McCarthy's office in the Capitol for talks that lasted about two-and-a-half hours. Looming risks of a potential US default negatively impact the US Dollar alongside the US Treasury bond yields, allowing Gold price to preserve the recovery gains.
If President Biden and Republican Mc Carthy failed to arrive at any decision on the US debt ceiling later on Monday, it could spell doom for markets and trigger a fresh risk-aversion wave. In case of intense flight to safety, the US Dollar could regain its upside momentum, but the US Treasury bond yield losses could cap the upside. Gold price, therefore, could witness some volatility but will likely remain in a familiar range.
Calendar-wise, there are no high-impact data releases from the United States; hence, the US debt ceiling talks will remain in the spotlight.
Federal Reserve Chair Powell saves the day for Gold price
On Friday, amidst anxiety over the US debt ceiling talks and Federal Reserve Chairman Jerome Powell’s speech, the US Dollar lost its weekly bullish momentum. It fell sharply, fuelling an impressive bounce in the Gold price.
At a Federal Reserve conference in Washington on Friday, Chairman Jerome Powell said that stresses in the banking sector could mean that “our policy rate may not need to rise as much as it would have otherwise to achieve our goals.”
Powell outrightly hinted at a June Fed rate hike pause, which exacerbated the pain in the US Dollar, as the benchmark 10-year US Treasury bond yields retreated from two-month highs of 3.72%. In the wake of Powell’s words, markets are now pricing a 14% probability of 25 basis points (bps) rate hike next month, compared with about a 33% chance for the same seen ahead of his speech.
Gold price technical analysis: Daily chart
Having found support just above the $1,950 psychological level, Gold price staged a solid comeback on Friday. But the further upside appears elusive so long as the Gold price remains below the bullish 50-Daily Moving Average (DMA) at $1,990.
Failure to yield a daily closing above the latter will reinforce bearish commitments, resuming the downside in Gold price back toward the six-week low of $1,952.
The next relevant support is seen at the March 27 low of $1,944, below which a test of the ascending 100 DMA at $1,930 cannot be ruled out. Ahead of that, the March 21 and 22 low near $1,935 could rescue Gold buyers.
At the time of writing, the 14-day Relative Strength Index (RSI) is inching slightly lower, below the midline. Thus, suggesting that there are chances for a fresh downswing in Gold price.
Conversely, immediate resistance is seen at the support-turned-resistance of 50 DMA at $1,990, above which Gold buyers will run into the flattish 21 DMA barrier, now at $2,003.
Gold bulls need to resist above the latter on a sustained basis to initiate a meaningful recovery toward the critical $2,022 supply zone.
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