Gold Price Analysis: Impact of US Dollar Surge and Debt Ceiling Updates on Gold Market

Gold Price Analysis: Gold prices (सोने की कीमतों) are experiencing losses, reaching a six-week low near $1,950 on Friday morning. This decline is attributed to a temporary pause in the upsurge of the United States Dollar (USD), as the market awaits updates on the US debt ceiling issue and the upcoming speech by US Federal Reserve (Fed) Chair Jerome Powell later in the day.

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The US Dollar has maintained its strength for the third consecutive day, despite the recent optimism surrounding a potential US debt ceiling deal. The positive sentiment arose from US President Joe Biden and House Speaker Kevin McCarthy expressing confidence in reaching a deal soon. A successful debt ceiling agreement would prevent a default and potential recession. This relief in the market has fueled the continuous rise of the US Dollar, supported by an increase in US Treasury bond yields across the board. As a result, the price of gold has faced significant selling pressure, breaching key support levels and testing the psychological level of $1,950, marking a six-week low

Furthermore, the US Dollar rally has been reinforced by encouraging data on weekly jobless claims in the United States. Initial jobless claims dropped by 22,000 to 242,000 in the week ending May 13, representing the largest decline since 2021. Continuing claims also decreased to 1.8 million in the week ending May 6. Additionally, hawkish comments from several Federal Reserve policymakers have further buoyed the US Dollar. Dallas Fed President Lorie Logan stated that current data does not support skipping an interest rate hike in the June meeting. Fed Governor Philip Jefferson emphasized that inflation remains too high, while St Louis Fed President James Bullard advocated for higher interest rates as a precaution against inflation.

As the week nears its end, the US Dollar is consolidating its gains, allowing for a brief respite before the next upward movement. The market sentiment is somewhat cautious due to escalating tensions between the United States and China regarding Taiwan. The US Trade Representative’s office announced on Thursday that the US and Taiwan have reached an agreement on the first phase of their trade initiative, which covers customs and border procedures, regulatory practices, and small businesses. This development has clouded the outlook for the upcoming visit of a Chinese commerce official to the US next week, leading to a slight dampening of investor sentiment.

Moreover, there are concerns as a small but influential Republican faction has warned of potential blockage of the agreement to raise the $31.4 trillion debt ceiling in the House of Representatives. They have expressed their demand for substantial federal spending cuts to be included in the accord. This has diminished the optimism surrounding the likelihood of a debt ceiling deal by the time Biden and McCarthy resume talks on Sunday.

Looking ahead, even if risk aversion becomes more prominent, the US dollar is expected to benefit, making it challenging for gold buyers to mount a comeback. However, the Gold price action will be significantly influenced by the upcoming speech by Federal Reserve Chairman Jerome Powell, updates on the US debt ceiling, and end-of-the-week market flows.

Gold price closed below the important bullish 50-Daily Moving Average (DMA) support, which was situated at $1,985 on Thursday. This downside break prompted a new wave of selling in the gold market, as sellers targeted the crucial support area around $1,950.

Currently, there is an attempt at a slight recovery in Gold price, indicated by the 14-day Relative Strength Index (RSI) showing signs of improvement. However, the RSI is still below the midline, suggesting that any recovery attempts are likely to be met with selling pressure.

The immediate resistance level is observed around the previous static support near $1,975. If the price manages to move above this level, the next challenge will be the 50 DMA barrier, which currently stands at $1,987.

Reclaiming the $2,000 threshold is crucial for Gold to regain its positive momentum.

On the other hand, a weekly closing below the psychological level of $1,950 would be highly unfavorable for Gold bulls and could pave the way for a test of the round level at $1,900. In case of further decline, the March 21 and 22 lows around $1,935 might provide some support before sellers aim for the bullish 100 DMA support at $1,929.