Gold Price Forecast: Traders Eyeing US Inflation Data, Debt Ceiling Stalemate

Gold Highlights

• US inflation data to impact gold prices
• Yellen warns of “constitutional crisis” over debt ceiling
• China’s gold reserves rise

Gold Overview

Gold (XAU) prices fell on Monday as investors awaited U.S. inflation data that could influence the Federal Reserve’s monetary policy stance.

At 03:20 GMT, gold was trading at $2021.30, down 1.40% from the previous close. On Friday, the SPDR Gold Shares ETF settled at $187.46, down 1.56%. This drop in gold prices was due to stronger-than-expected U.S. payrolls data, which tempered expectations of interest rate cuts from the Fed.

Weak Inflation Data Could Boost Gold

This week, the U.S. will release important economic data that includes the consumer price index (CPI), the producer price index (PPI), and consumer confidence. If these reports show subdued inflation, it could lead to lower interest rate expectations from the Fed, which would be beneficial for gold prices. Traders also keep an eye on the U.S. banking sector and debt ceiling developments.

Yellen’s Warning Boosts Gold Interest.

Gold (XAU) is a popular safe-haven asset that people tend to invest in during times of economic uncertainty and lower interest rates. In a recent warning, U.S. Treasury Secretary Janet Yellen emphasized the importance of Congress raising the debt ceiling.

She explained that if they fail to do so by early June, it could lead to a “constitutional crisis” and harm the federal government’s creditworthiness. There are also concerns over the potential financial market consequences that could arise. If the U.S. government runs out of cash to pay its bills, gold is likely to benefit, and its prices could move up to $2,100.

China’s Gold Reserves Rise Again

Finally, it’s worth noting that China held 66.76 million fine troy ounces of gold at the end of April, up from 66.50 million ounces at end-March. The value of China’s gold reserves rose to $132.35 billion at the end of April from $131.65 billion at the end-March.

Gold (XAU) Outlook Uncertain Amidst Economic Data

The near-term outlook for gold (XAU) remains uncertain as investors wait for key economic data from the US, including CPI, PPI, and consumer confidence reports. If the data shows subdued inflation, this could be good news for gold prices due to lower interest rate expectations from the Fed.

However, a drop in gold prices on Monday indicates investor caution, and U.S. Treasury Secretary Janet Yellen’s warning about the debt ceiling could also affect gold prices. In the event of a U.S. government cash shortage, gold is likely to benefit, potentially pushing prices up to $2,100.

Technical Analysis

Gold is edging lower but hovering slightly above its pivot at $2002.54. This price is controlling the near-term direction of the market.

A sustained move over $2002.54 will indicate the presence of buyers. The first upside target is (R1) at $2035.78. Overtaking this level will indicate the buying is getting stronger with the next major target (R2) at $2082.03.

A failure to hold $2002.54 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into (S1) at $1956.30.