The US debt ceiling crisis boosted gold prices towards the end of last week

Inflation levels remain higher than the Federal Reserve's target

By Raed Alkhedr | @raedalkhedr | 22 May 2023

Technical Analysis_Golddd-2 (1)
  • Despite negative developments in the US market, gold has not yet been able to find stability above the crucial $1980 level

  • Recent statements by Jerome Powell indicate that the Federal Reserve may not feel compelled to raise interest rates beyond their current levels

  • There are ongoing serious disagreements with Republican negotiators in the debt ceiling talks, which adds uncertainty to the economic landscape

Economic developments and events impacting gold price movements

After experiencing an increase in the previous week's sessions, the precious metal began the first session of the current week with a slight decline, with gold trading near the $1975 per ounce level. These gains were influenced by negative developments concerning the US debt ceiling crisis, as well as statements made by Jerome Powell regarding the monetary policy direction in the near future, which bolstered demand for the precious metal.

In this regard, Jerome Powell, the chairman of the Federal Reserve, acknowledged that inflation has surpassed the bank's target levels and mentioned that the Federal Reserve might not be compelled to further increase interest rates due to the tightening credit conditions. Powell added that the current data supports expectations that it will take longer to reduce inflation.

However, concerns resurfaced in the market as talks between the parties regarding budget issues collapsed, casting a shadow over the movements of the US dollar index.

The White House issued a statement indicating that there are still significant disagreements with Republican negotiators in the debt ceiling talks, stating that the discussions will remain challenging as both sides strive to reach an agreement.

Moreover, Republican Deputy Garrett Graves, nominated by McCarthy to lead the talks with the White House, commented that no agreement has been reached yet, emphasizing that the discussions are now considered stalled due to the lack of constructive dialogue.

Key technical levels impacting gold price movements

Gold has experienced a decline, breaking through the support level of $1970, which further contributed to its decline, reaching its lowest point last week at $1951.85. However, recent economic events and developments have prompted a corrective move, pushing gold to the $1980 level. Despite the negative factors influencing gold's rise, it has yet to stabilize above the crucial $1980 level, which is significant in confirming its upward trajectory.

Nevertheless, as long as gold fails to maintain stability above $1980, there is a high likelihood of a downward movement, potentially testing the support level of $1950. A break below this level may lead to an extended decline towards $1935. Conversely, if gold manages to establish stability above $1980, it may contribute to further upward momentum, with a potential test of resistance levels at $2000. Surpassing this level could lead to an extended rise towards $2040.

gold 5-22-2023