The Gold Spots (XAUUSD) have had a mixed opening to the week as the non-yielding bullion continues to face challenges of the strengthening of the US Dollar, which has weighed on the commodity’s price. Investors are closely monitoring the actions and statements of the Federal Reserve as the potential for interest rates for longer continues to weigh on the non-yielding bullion, with the CME FedWatch Tool reporting that the cash market is pricing in a probability of 66.4% for a 25-basis point rate hike in June, compared to the 25.7% probability just a week ago.

The resolution of the debt ceiling issue in Washington could impact the trajectory of the precious yellow metal. Concerns over the US debt ceiling have started to subside, leading to a reduction in safe-haven demand for gold. Meanwhile, US yields have been steadily climbing, particularly at the shorter end of the curve. These higher yields signal market expectations that the Federal Reserve is less likely to cut rates in the near future, impacting the attractiveness of non-yielding bullion.

Technical

From a technical perspective, the daily chart shows that gold remains within an ascending trend channel since the rejection of the major support level (red line) of $1616.64/ounce in November of the previous year. However, the price action is currently confined within a minor trend, a descending channel, formed following the bulls falter after creating a new all-time high (green line) of $2078.37/ounce at the beginning of the month and are currently testing the support of the main trend’s ascending channel.

The 4H chat shows that the precious yellow metal is trading around the daily pivot point at $1946.84/ounce, close to the ascending channel’s support. For the bearish case, should gold falter at the daily pivot point, the bears could look to target the support of the ascending channel and the support level at $1937.04/ounce. A sustained break below $1937.04/ounce would signal the presence of bearish sentiment and would bring the $1920.90/ounce support level firmly into play. A clean break below $1920.90/ounce could trigger a bearish run towards the golden ratio, while a hold above these levels might suggest the continuation of the main bullish run.

For a bull case, the fall of the pivot point would expose the $1956.90/ounce and $1981.94/ounce resistance levels into the bulls’ charge, with the descending channel’s resistance acting as a major barrier between the resistance levels.

Summary

With the full schedule of economic indicators in the US in the coming sessions, market participants will have to watch closely the reports to gauge a potential direction for the gold spots in the medium term. Factors such as the US Dollar’s strength, Treasury yields, and developments surrounding the debt ceiling will likely influence the outlook for non-yielding bullion.

Sources: TradingView, Reuters.

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