In the Gold Rush, the Dollar Strikes Back. 

The Gold Spot Prices (XAUUSD) have been confined within a narrow trading range since Wednesday, 17 May 2023, as the US dollar surged to a two-month high. The strengthening dollar dampened demand for the dollar-denominated precious metal while investors eagerly awaited updates on the prolonged debt ceiling negotiations in Washington. 

The US debt ceiling stalemate and the subsequent uncertainty surrounding the negotiations have helped strengthen the US dollar to its highest levels since Mid-March, weighing heavy on the non-yielding bullion. As the dollar retains its strength, it continues to overshadow gold’s safe-haven appeal, influencing its trade dynamics. Despite attempts to recover from its previous sell-off, gold’s upward potential remains limited by the combination of a stronger dollar and higher US Treasury yield. 


The 4H chart shows that the non-yielding bullion is trading within the $1951.62/ounce-$1986.05/ounce trading range within a descending channel in anticipation of today’s upcoming US economic data. The appearance of the descending channel could suggest the persistence of bearish sentiment towards the non-yielding bullion. Therefore, the bears hope the US economic data and the debt ceiling jitters can help the price action sustain a break below the range, with the $1934.92/ounce support level acting as a level of significance for the bears. A break below the $1934.92/ounce support level would bring the $1909.01/ounce support level at the golden ratio into play. 

However, the bulls could be hoping that the economic data could help propel a breakout above the trading range and potentially the upper trendline of the channel. Should the bulls succeed in breaking out of the channel, the market could keep a keen eye on the price action as the bulls charge for the 23.60% Fibonacci retracement level at $2013.60/ounce. A break above the $2013.60/ounce level could trigger a bullish run towards the $2021.95/ounce and $2052.85/ounce resistance levels above. Bearish momentum would remain should the bulls fail to sustain a break above the 23.60% Fibonacci retracement level. 


In addition to monitoring the debt ceiling negotiations, investors eagerly awaited crucial economic indicators to gauge the health of the economy. They focused on US GDP estimates and initial jobless claims due later in the day for insights into the overall economic landscape, which could have ripple effects on gold’s short-term performance. 

Thus, with the gold spots trading within a range, the direction of the precious yellow metal in the short term will likely depend on the outcome of the debt ceiling negotiations and the upcoming US economic data. 

Sources: TradingView, Reuters, Trading Economics. 

DISCLAIMER:This report has been prepared by our Group company. This document is not intended as an offer, solicitation or recommendation to buy or sell financial instruments or to make any investment. The Group has used reasonable efforts to obtain information from reliable sources and the report is provided without representation or warranty of any kind (neither expressed nor implied).  The Group disclaims liability for any publication not being complete, accurate, suitable and relevant for the recipient. Specifically, the Group disclaims liability towards any user and other recipients of this report.