During the Asian session, the price of gold (XAU/USD) faced downward pressure and fell below the $1,960.00 level. This decline was driven by the US Dollar Index (DXY), which is aiming to reach a 10-week high of 104.00. The strength of the USD Index is primarily due to ongoing uncertainty surrounding US debt-ceiling negotiations between the White House and Republican leaders, according to FXLeaders.com.
On the other hand, S&P500 futures remained strong in the Asian session, indicating resilience in US equities after a weak performance observed on Wednesday. The USD Index reached its daily high at 103.92, fueled by concerns over the US borrowing cap.
The delays in resolving the US debt-ceiling issue are attributed to House of Representatives Kevin McCarthy’s reluctance to support additional taxes for the wealthy and increased budget spending. However, McCarthy remains optimistic about reaching a bipartisan agreement.
Despite the dovish signals on interest rate guidance from the Federal Open Market Committee (FOMC) minutes, gold prices failed to capitalize on them. Fed policymakers perceive the likelihood of a June rate hike as “less certain” due to potential banking concerns.
Traders will closely monitor the upcoming US Durable Goods Orders data, which is expected to show a contraction of 1.0% compared to the previous expansion of 3.2%.
Technical Outlook for Gold
After testing the level of 1977.25 in previous sessions, gold prices experienced a strong downward rebound, approaching the first target at 1945.20. This level represents the 50% Fibonacci correction level for the upward move from 1809.35 to 2081.05. Breaking this level could trigger further bearish correction with the next target at 1913.15.
Therefore, the bearish outlook for gold remains valid, awaiting negative momentum to push the price towards the suggested targets. It is crucial for gold to stay below 1977.25 to sustain the anticipated decline.
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