Gold Price Forecast: XAU/USD bears cheer hopes of no ‘catastrophic’ default of United States

• Gold price remains weak despite recent rebound from the lowest level in three weeks.
• United States debt ceiling drama, hawkish Federal Reserve talks underpin US Treasury bond yields, USD and weigh on XAU/USD.
• Second-tier US data, risk catalysts eyed for clear direction of the Gold price.

Gold price (XAU/USD) licks its wounds at a three-week low, picking up bids to print mild gains around $1,985 amid the early hours of Thursday’s Asian session. In doing so, the XAU/USD bears take a breather after declining in the last two consecutive days amid a lack of major data/events. Even so, expectations that the United States will be able to stretch its debt limit and join the hawkish Federal Reserve (Fed) talks to weigh on the Gold price.

Gold price bears burden of United States Treasury bond yields, US Dollar

Gold price broke short-term triangle support earlier in the week and dropped further afterward to refresh the multi-day low amid the firmer United States Treasury bond yields and the US Dollar.

That said, the US 10-year and two-year Treasury bond yields rose to the highest levels since May 01 and April 24 while portraying a four-day uptrend near 3.57% and 4.16% respectively, remaining unchanged by the press time. The same allows the US Dollar Index (DYX) to stay upbeat despite the latest retreat from a seven-week high to 102.85.

With this, the Gold price remains pressured as the markets cheer the firmer US Dollar amid upbeat expectations.

US debt ceiling drama, hawkish Federal Reserve talks favor US T-bond yields, USD

In addition to the United States debt ceiling jitters, the Federal Reserve officials’ hawkish bias also favors the US Treasury bond yields and the US Dollar, which in turn weighs on the Gold price.

Although markets doubt a brief meeting between US President Joe Biden and House Speaker Kevin McCarthy and portray the latest corrective bounce off the Gold price, comments from both key diplomats propel hopes of no US debt ceiling expiry and challenge the XAU/USD bulls. On Wednesday, US House Speaker Kevin McCarthy said in an interview on CNBC, "Now we have an opportunity to find common ground but only a few days to get the job done." Further, US President Joe Biden said that he is confident that they will be able to reach a budget agreement and noted that it would be catastrophic if the US failed to pay bills, per Reuters. "Will have a news conference on Sunday on the debt issue,” added US President Joe Biden.

On the other hand, recently upbeat US data allow the Federal Reserve (Fed) officials to reconfirm their hawkish bias about the monetary policy and exert additional downside pressure on the Gold price. On Wednesday, US Housing Starts came out as unimpressive with 1.401M figures for April versus 1.4M expected and 1.371M prior (revised). Alternatively, the Building Permits for the said month eased to 1.416M from 1.437M edited previous readings and market forecasts. Previously, upbeat US Retail Sales and Industrial Production details for April allowed the Federal Reserve (Fed) officials to remain hawkish and prod the risk-on mood. The latest among them were Federal Reserve Bank of Chicago President Austan Goolsbee and Atlanta Fed President Raphael Bostic who reiterate inflation fears and pleased the Gold sellers.

Qualitative catalysts are the key for XAU/USD watchers

Moving on, a light calendar with only second-tier United States jobs and activity data may not be able to entertain the Gold price traders. As a result, headlines surrounding the US default and comments from the global central bankers, mainly from the Federal Reserve (Fed) officials will be watched carefully for clear XAU/USD directions.

Gold price technical analysis

Confirmation of a two-month-old bearish triangle joins the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator to favor the Gold price downside at the lowest levels in a month.

However, the below 50 level of the Relative Strength Index (RSI) line, placed at 14, suggests the XAU/USD bears wait for sustained trading beneath the 50-DMA, around $1,985 by the press time, before adding more short positions.

Following that, the yellow metal could drop to the 50% Fibonacci retracement of its March-May upside, around $1,945, ahead of testing the 100-DMA support of $1,925 and the golden Fibonacci ratio, the 61.8% mark, of around $1,910.

In a case where the Gold price remains bearish past $1,910, the odds of witnessing a slump in the XAU/USD can’t be ruled out.

Alternatively, the Gold price recovery needs to sustain beyond the stated triangle’s bottom line, $1,995, quickly followed by the $2,000 round figure hurdle.

Even so, the 23.6% Fibonacci retracement level and the aforementioned triangle’s top, respectively near $2,015 and $2,050 will be in the spotlight.

To sum up, the Gold price remains on the bear’s radar even as the road towards the south is long and bumpy.

Gold price: Daily chart

Trend: Further downside expected