Gold Price Forecast: XAU/USD holds ground above $1,970, awaits fresh catalyst

XAU/USD Current price: $1,974.84

• Market players await news on the US debt ceiling, doubt about Fed’s next move.
• Federal Reserve officials suggest it is not yet time for a pause.
• XAU/USD consolidates Friday’s gains but lacks directional momentum.

Spot Gold is under mild pressure at the beginning of the week, with XAU/USD trading at around $1,975 a troy ounce. The bright metal, however, hovers at the upper end of Friday’s range as financial markets await a fresh catalyst.

Speculative interest has one eye on US debt-ceiling talks and whether progress can be achieved before a potential default on June 1. At the time being, there’s no agreement on significant items, although discussions will continue throughout the day.

At the same time, tensions mount ahead of the release of the FOMC Meeting Minutes next Wednesday and as multiple Federal Reserve (Fed) speakers hit the wires. Federal Reserve Bank of St. Louis President James Bullard said he believes the central bank will have to go higher on the policy rate, adding that he is expecting at least two more 25 bps rate hikes. Minneapolis Fed President Neel Kashkari, however, noted that whether to hike or pause is a close call, adding that he is willing to hold rates steady to give officials more time to assess the effects of past rate increases.

Finally, Federal Reserve Bank of San Francisco President Mary Daly noted that “tighter credit conditions may be akin to one to two rate hikes,” adding policymakers must be very data-dependent. Financial markets are betting the US central bank will refrain from hiking rates in June and July amid concerns that further tightening will damage the financial system.

XAU/USD price short-term technical outlook

The daily chart for the XAU/USD pair shows that the risk remains skewed to the downside. Technical indicators remain within negative levels, with the Momentum heading firmly south and at fresh two-month lows. The Relative Strength Index (RSI) indicator, in the meantime, lacks directional strength at around 44. At the same time, the 20 Simple Moving Average (SMA) grinds lower well above the current level, while the longer moving averages maintain their upward slopes below it.   

The near-term picture is neutral-to-bearish. The pair is seesawing around a bearish 20 SMA while below the longer ones, which lack directional strength. At the same time, technical indicators head nowhere just below their midlines, reflecting limited buying interest. Friday’s high at $1,984.16 is the level to watch on the upside, as a break above it could lead to a test of the $2,000 threshold.

Support levels: 1,961.60 1,944.00 1,932.10  

Resistance levels: 1,984.20 1,996.80 2,008.30

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