Gold Price Forecast: XAU/USD slips amid US debt ceiling uncertainty, US equities tumble

Gold price is trimming some of its earlier losses, though stills trading negative in the day, down 0.06%, as US Treasury bond yields rise due to uncertainty around US debt-ceiling discussions. Hence, US Treasury bond yields rise, underpinning the US Dollar (USD), a headwind for XAU/USD’s prices. At the time of writing, the XAU/USD is trading at $1968.28, below its opening price.

US Treasury bond yields rise amid tense debt-ceiling discussions, dampening XAU/USD’s recovery

Wall Street portrays a sour sentiment, with equities trading lower. The economic data revealed in the United States (US) is overshadowed by discussions about raising the debt ceiling in the US. Although US President Joe Biden and US House Speaker Kevin McCarthy called Monday’s talks productive, an agreement remains far from being done. In the meantime, US Treasury Secretary Janet Yellen continued to pressure that the US will run out of cash by June 1.

Given the backdrop, US Treasury bond yields extended its gains, with the 10-year bond yielding 3.726%, a headwind for XAU/USD’s recovery. Therefore, US real yields, calculated using the nominal yield minus inflation expectations, taken from Treasury Inflation-Protected Securities (TIPS), sit at 1.49%, about to cross above 1.50%.

Data-wise, the US economic agenda features S&P Global PMIs for May on their final readings. The Manufacturing Index plunged to 48.5 below estimates and the prior reading above 50, while the Services Index rose to 55.1. The Composite Index stood at 54.5, dragged by the rise in services.

US New Home Sales rose to a 13-month high, expanded by 4.1% or 683K units in April, the highest figure reported since March 2022, according to the US Commerce Department. Given that housing data from the United States showed signs of a recovery, it should be interesting to hear from US Federal Reserve (Fed) officials, who remain split between skipping or lifting rates at the upcoming June meeting.

Recently, Richmond’s Fed Index for Manufacturing and Services readings dropped sharply, with manufacturing at -15 vs. -8 expected. Services improved to -10 from -29 in April.

Upcoming events

The US Federal Reserve Open Market Committee (FOMC) May minutes on Wednesday, followed by Initial Jobless Claims, Gross Domestic Product (GDP) on Thursday, and inflation and consumer sentiment on Friday.

XAU/USD Price Analysis: Technical outlook

From a daily chart perspective, the XAU/USD is still neutral to upward biased. The yellow metal dip below the 50-day Exponential Moving Average (EMA) at $1976.52, opening the door to register a weekly low of $S1954.37 before finding bids that lifted Gold toward the current spot price. Nevertheless, the Relative Strength Index (RSI) indicator is still in bearish territory, suggesting that sellers remain in charge, so the jump in XAU/USD price, could pave the way for better entry prices. The first support would be the weekly low of $1954.37 before testing $1950, ahead of reaching the 100-day EMA of 1932.97. Conversely, reclaiming the 50-day EMA will expose the 20-day EMA At $1993.31 before reaching $2000.