Gold Price Forecast: XAU/USD reclaims $1960 on US debt ceiling hopes, falling US bond yields
- Amid the uncertainty, the gold price stays above the $1960 mark, even preparing for over 1.3% monthly losses in May.
- Expectations of resolving the US debt ceiling issue spark a dip in US Treasury bond yields, offering a lift to the XAU/USD price.
- Dovish tones from Fed officials and robust US job openings data paint a mixed economic picture, potentially impacting gold’s future trajectory.
Gold price advances during the day but remains set to achieve monthly losses of more than 1.30% in May, portraying modest gains, and is trading back above the $1960 area. Factors like confidence for removing the debt ceiling in the United States (US), with the US House set for a vote on Wednesday night, spurred a plunge in US Treasury bond yields, a tailwind for XAU/USD prices.
XAU/USD finds support in plunging US Treasury yields, despite the impending monthly loss
The US House of Representatives held a procedural vote, “which allows for the start of the debate and then a vote on the bill itself, passed by a vote of 241-187, with 52 Democrats needed to overcome the opposition of 29 Republicans,” according to Reuters.
US bond yields dropped on investors’ trust in US politicians. The US 2-year Treasury note plummeted 20 bps in the last few days, from around 4.60% to 4.409%. As shown by US 10-year TIPS, US real yields remained unchanged compared to Tuesday’s session at 1.483%, a headwind for the US Dollar (USD).
In early data, the labor market in the United States is showing its resilience, as revealed by the JOLTs report, with job openings crushing estimates of 9.375M, expanding came at a 10.1M pace in April, signaling the tightness of the labor market.
Additionally, dovish comments from the US Federal Reserve (Fed) nominee for Vice-Chairman Philip Jefferson, open to skipping a rate hike at the upcoming June meeting, put additional pressure on US bond yields, with the swaps market estimating a 30% chance for a 25 bps rate hike in June.
Of late, echoing some of his comments was Philadelphia’s Fed President Patrick Harker commenting that he’s inclined to “skip” a rate hike in June. Nonetheless added that incoming data “may change my mind.”
In the latest data, the Fed’s Beige Book revealed that inflation had slowed and that “expectations for future growth deteriorated a little.”
XAU/USD Price Analysis: Technical outlook
XAU/USD remains neutrally biased, slightly tilted upwards but cushioned upwards, in the confluence of the 50 and 20-day Exponential Moving Averages (EMAs) each at $1971.39 and $1975.01, respectively. Downwards, the yellow metal will clash with the 100-day EMA at 1935.17 before challenging the $1900 figure. Once cleared, sellers could drag Gold spot prices toward the 200-day EMA at $1885.43.
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
