Gold managed to consolidate below the support level, which was relevant during the month. The weakness in gold was caused by positive expectations concerning the U.S. debt ceiling, potential tightening of the Fed's policy, and strengthening of the dollar index. Also, the U.S. economy still shows its power by representing positive statistical data.
The American currency gets stronger amid the publication of solid macroeconomic data, contributing to the growth of investors’ expectations related to the Fed rate hike. According to the CME FedWatch tool, the likelihood of another 25 basis points rate hike in June is 38%. Earlier, Fed Chairman Jerome Powell announced a probable pause in the cycle of monetary policy tightening. However, other representatives of the regulator were more hawkish. This made markets review their forecasts and dismiss hopes for rate cuts by the end of the year.
The issue with the debt ceiling may be solved by the end of this week! Even if the outcome is negative, officials will still have time for new negotiations. The U.S. president has said several times that he won’t let America default. The other officials aren’t interested in this either.
U.S. President Joe Biden and House Speaker Kevin McCarthy hope to agree on the debt ceiling after Biden returns from Sunday's G7 meeting in Japan.
Markets are expecting a positive conclusion to the debt ceiling talks as recent comments suggest progress, said Ilya Spivak, head of a global macro at Tastylive.
According to the technical analysis, the gold price came out of the sideways range. Today it is tested from bottom to top. Due to rather negative external factors, we suppose that the metal will continue downward movement soon.
The downside target will be the level of $1945. It corresponds to the March support of this year and is also located near the border of the medium-term uptrend. A stop-loss will be set at the return to the rectangle, which corresponds to the price of $1975.
Decrease in gold:
Take profit — 1945
Stop-loss — 1975
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