Gold Price Forecast: XAU Higher with US Debt Ceiling Talks, Fed’s Rate Path in Focus

James Hyerczyk
Updated: May 22, 2023, 18:48 UTC

Gold prices rise as traders await clarity on U.S. debt ceiling negotiations and Federal Reserve's interest rate strategy.

Gold (XAU)

In this article:

Gold Highlights

  • XAU prices influenced by US debt ceiling negotiations, Federal Reserve’s interest rate path
  • Gold seen as a safe-haven investment amid concerns over the debt ceiling
  • Impact of US default on gold more significant than upcoming Fed meeting

Gold Overview

Gold (XAU) prices are edging higher on Monday, as traders looked for more clarity around the U.S. debt ceiling negotiations and the Federal Reserve’s interest rate path. The decline in the dollar index has also made gold more affordable for international buyers.

At 10:13 GMT, Gold (XAU) is trading at $1979.55, down $1.38 or -0.07%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $183.63, up $1.79 or +0.98%.

Gold Rises Amid Debt Ceiling Talks

Gold traders are closely monitoring the ongoing discussions about the U.S. debt ceiling. This, along with comments from Federal Reserve Chair Jerome Powell indicating a less aggressive stance, has increased the appeal of gold as a safe-haven investment. The concerns surrounding the debt ceiling are providing support for gold prices, and there is a strong interest in whether a resolution will be reached. The outcome of these talks is seen as more significant for gold than the upcoming Federal Reserve meeting, as a U.S. default could happen before the meeting and impact the Fed’s decision-making.

Traders Await Fed’s Interest Rate Strategy

Traders are also looking for indications of the future interest rate strategy of the U.S. central bank, following Powell’s suggestion of a possible pause in June policy. The minutes of the recent Federal Open Market Committee meeting will be released soon, but the debt limit discussions may overshadow other economic reports.

Gold Trades Near Critical Support Level

Currently, gold is trading within a range above $1,956.30, and if it drops below that level, it may test support at $1,923.06 and $1,876.81. It’s worth noting that gold tends to lose its appeal in a high-interest-rate environment. The recent statements from Powell about the uncertainty regarding the need for further interest rate hikes, as well as concerns about inflation and credit tightening, led to a 1% increase in gold prices on Friday.

Technical Analysis

Daily Gold (XAU)

Gold (XAU) is trading on the bearish side of the pivot at $2002.54, putting it in a weak position. The market is currently hovering just above a key level at $1956.30 (S1).

Look for counter-trend buying on the first test of $1956.30 (S1). If this move creates enough upside momentum then we could see a retest of $2002.54 over the near-term.

A failure to hold $1956.30 (S1) will indicate the selling pressure is getting stronger. The could extend the breakinto $1923.06 (S2).

S1 – $1956.30 R1 – $2035.78
S2 – $1923.06 R2 – $2082.03
S3 – $1876.81 R3 – $2115.26


About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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