The gold spot price (XAUUSD) remained subdued as its safe haven demand is under question amid optimistic developments in the US debt ceiling agreement. As the high volatility events such as the banking crisis and debt ceiling debacle take a backseat, is this the end of the safe haven precious metal reign?
The market’s risk sentiment currently drives the spot price as the congressional vote on the debt limit agreement approaches. However, once the deal passes, the focus could shift back to the Federal Reserve’s hiking cycle, with the NFP report looming. While sentiment suggests additional hikes, all is not doomed for the gold bulls. According to the World Gold Council, 24% of central banks want to increase their exposure to the precious metal, highlighting the persistent geopolitical tensions and recession fears inherent in the market that could sustain the bulls in the longer term.
Technical
A five-month-long ascending channel has formed on the 1D chart, with the bears approaching support at the Fibonacci midpoint of $1,929.54 per ounce from the early May peak. The bears currently have momentum, but the trajectory could change with crucial economic releases later this week.
If the labour report reveals a persistently tight labour market, the bets for a Federal Reserve interest rate hike in June could enforce a channel breakdown, bringing the 61.8% Fibonacci golden ratio of $1,901.22 per ounce into play. Neckline support is established at $1,860.92 per ounce if momentum triggers an additional leg down.
On the other hand, a soft labour report could boost the bets for a rate pause, which could aid the bulls in bouncing off support at $1,929.54 per ounce and continue the longer-term ascending trend. Support and resistance at $1,957.85 and $1,992.88 per ounce stand in the way of a retest close to the all-time highs of around $2,052.18 per ounce.
Summary
As the debt ceiling jitters fade, the increasing bets on a hawkish Federal Reserve are pressuring the gold spot price. However, with support at $1,929.54 edging closer, the market could look to the NFP report for additional clues on the direction of the interest rate path, which could drive the spot rice as we advance.
Sources: Koyfin, Tradingview, Reuters, World Gold Council
