- The XAU/USD rally was fueled by concerns over the US debt ceiling and slowing Chinese manufacturing activity.
- Falling US Treasury yields support gold prices despite a strong dollar.
- The focus is on upcoming US CPI data, which could affect gold prices.
The price of gold is having consecutive bullish days while the XAU/USD It meanders near Monday’s high of $2,029.40, bolstered by falling US Treasury yields despite a strong US dollar (USD). XAU/USD is supported by uncertainty surrounding the US debt ceiling and the upcoming US inflation report. At the time of writing, XAU/USD is trading at $2,030.68, up 0.48% on the day.
XAU/USD Supported by Risk Aversion and Falling US Bond Yields
The negative tone is being reflected in Wall Street, which is posting losses. Concern over politics, specifically the debt ceiling, weighed on market sentiment. Credit conditions in the United States (US) began to tighten, as the Fed’s first-quarter Official Lending Survey shows, though “not as disastrous as many doomsayers feared,” analysts at Brown Brothers Harriman said.
Another reason that bolstered appetite for XAU/USD was that China revealed that manufacturing activity has slowed. At the same time, its Trade Balance showed that exports and imports fell from 14.8% to 8.5% in April and from -1.4% to -7.9%, respectively.
On Tuesday, US President Joe Biden will host officials from the US Congress to lay the groundwork for reaching a consensus on the US debt ceiling.
Meanwhile, the US Dollar Index (DXY), an indicator that tracks six currencies against the dollar, is up 0.29% to 101.680, limiting the XAU/USD rally. US Treasury yields are mixed, although in the short term, the most interest rate sensitive, the 2-year yield gains one basis point to 4.024%.
Meanwhile, statements have been made by various members of the Fed, led by Fed Governor Philip Jefferson, who has asserted that the banking system is sound and resilient and that entities have begun to raise lending standards. . As for inflation, it has started to slow down in an “orderly fashion” and will come down as the economy continues to grow.
For his part, New York Fed President John Williams stated: “We didn’t say we’re done,” adding that he would depend on the data and could raise rates if necessary.
What’s next on the US economic calendar
In the US, the April Consumer Price Index (CPI) is expected to come in at 5% yoy, while the underlying reading stands at 5.5%.
XAU/USD Technical Analysis
XAU/USD recovered some ground after testing the 20-day EMA at $2006.62, which also crossed a month-old uptrend line of support. However, it is facing solid resistance around the April 5 high of $2,032.13, which, if broken, would clear the way for XAU/USD to challenge the April 13 high of $2,048.79. .
On the other hand, the first support for XAU/USD would be the 20-day EMA at $2,006.83, followed by the $2,000 figure. Once broken, it would expose the April 19 lows at $1,969.34.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
