Gold Price Forecast: XAU/USD bears approach $1,930 support on US debt ceiling extension, NFP eyed

Gold Price (XAU/USD) takes offers to refresh intraday low near $1,941 as it fails to cheer the United States policymakers’ initial agreement to avoid the ‘catastrophic’ default on early Monday. In doing so, the XAU/USD takes clues from the uncertainty surrounding the deal’s passage through the US Congress, as well as the hawkish Federal Reserve (Fed) concerns. Additionally, the cautious mood ahead of this week’s US Nonfarm Payrolls (NFP) also favors the Gold sellers.

Gold Price fails to cheer agreement on debt ceiling stretch

Gold price justifies the market’s fears of the United States default, despite the latest agreement on the US debt limited extension. The reason could be linked to some of the policymakers’ support of the deal.

That said, US President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative deal to raise the federal government's $31.4 trillion debt ceiling through January 2025. The deal, however, lacks support from some of the extreme leftists and rightists due to the compromise each party had to do to reach the agreement. It should be noted that the debt ceiling deal needs to pass through the House on Wednesday and the Senate by June 05 to avoid the looming ‘catastrophic’ default. Recently, US President Biden ‘strongly’ urged both chambers to pass the agreement.

Given the optimism surrounding the US debt ceiling deal, coupled with the nearness to short-term key technical support, the Gold sellers should remain cautious ahead of the key United States Nonfarm Payrolls.

United States data, hawkish Federal Reserve bets prod XAU/USD bulls

Apart from the US debt ceiling concerns, upbeat US data and comments from the International Monetary Fund Managing (IMF) Director Kristalina Georgieva also favor the Gold sellers.

In the last week, US PMIs, the second estimate of the first quarter (Q1) 2023 Gross Domestic Product (GDP), Durable Goods Orders and the Core Personal Consumption Expenditure (PCE) Price Index for the said month, known as the Fed’s preferred inflation gauge, marked upbeat details in their latest readings. On Friday, US Durable Goods Orders for April came in better-than-forecast to 1.1% from 3.3% prior, versus -1.0% expected. Further, Nondefense Capital Goods Orders ex Aircraft, also known as the Core Durable Goods Orders, marked upbeat growth of 1.4% compared to -0.2% anticipated and -0.6% previous readings. Additionally, the Core PCE Price Index for the said month rose past market forecasts and previous readings of 0.3% MoM and 4.6% YoY to 0.4% and 4.7% in that order.

The data allowed IMF’s Georgieva to state that the US interest rates will need to be higher for longer. Alternatively, Federal Reserve Bank of Cleveland President Loretta Mester said that the Personal Consumption Expenditures (PCE) Price Index released on Friday underscored the slow progress on inflation. During the weekend, Federal Reserve Bank of Chicago President Austan Goolsbee welcomed the US debt ceiling news while also saying, amid the CBS Show “Face the Nation”, “I try to make it a point not to prejudge and make decisions when you are still weeks out from the meeting."

Given the recently increasing support for the Federal Reserve’s (Fed) 25 basis points (bps) of rate hike in June, the Gold price may witness further downside. However, it all depends upon this week’s key US political drama and the key US NFP.

US Nonfarm Payrolls, House passage of debt limit deal eyed

Looking ahead, Monday’s off in major trading frontiers may allow the Gold Price to consolidate the recent losses but the overall view remains bearish amid the hawkish Fed bets and concerns about the US debt ceiling. Even if the US policymakers avoid the ‘catastrophic’ default, the debt deal will allow the Fed to remain on its preferred plan of “higher for longer rates”, which in turn weighed on the Gold price. That said, this week’s US jobs report for May will also be key to watch on the calendar for clear directions.

Gold price technical analysis

Gold price eases below a three-week-old descending resistance line, around $1,954 by the press time, after falling the last three consecutive weeks.

The XAU/USD retreat ignores the Relative Strength Index (RSI) line’s, placed at 14, downbeat performance in the past few days. However, the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator lure Gold buyers.

Apart from the MACD signals and the immediate resistance line, a convergence of the 21-DMA and 50-DMA, around $1,995 by the press time, quickly followed by the $2,000 round figure, adds to the upside filters for the XAU/USD to cross to convince buyers.

In a case where the Gold price remains firmer past $2,000, the previous monthly high of around $2,050 and the recently flashed record top surrounding $2,080 will be in the spotlight.

On the flip side, a daily closing below the resistance-turned-support line of around $1,954 isn’t an open invitation to the Gold sellers as an upward-sloping trend line from November 2022, close to $1,930, can challenge the bears before giving them control.

To sum up, the Gold Price’s road to bull’s dominance is far from sight.

Gold price: Daily chart

Trend: Limited upside expected