Gold defends corrective bounce amid debt ceiling fight

Gold price is struggling to defend the week-start corrective bounce amid mixed sentiment. Anxiety ahead of the top-tier United States data, debt ceiling talks prod XAU/USD buyers. Meanwhile, the US Dollar bears take a breather amid hawkish Federal Reserve talks.

Also challenging the XAU/USD’s week-start corrective bounce are the mixed updates from the United States data and Federal Reserve (Fed) talks, not to forget unclear statements from the US policymakers ahead of the key debt ceiling talks scheduled for 19:00 GMT.

The precious metal benefits from the downbeat US Dollar and hopes for more demand from China, one of the key XAU/USD consumers. Also underpinning the price upside could be the scheduling of the US debt ceiling negotiations after postponing the talks on Friday.

The Fed signals have been mostly upbeat as Atlanta Fed President Raphael Bostic told CNBC on Monday that there is still a long distance to go on inflation and added that they may have to “go up on rates”. On the contrary, Chicago Federal Reserve Bank President Austan Goolsbee said in an interview with CNBC on Monday that a lot of impact of rate hikes is still in the pipeline. Furthermore, Minneapolis Fed President Neel Kashkari stated that signaled that the Fed has a long way to go to get inflation to 2.0%.

The People’s Bank of China’s optimism also underpins the Gold price upside. That said, PBOC keeps the one-year Medium-term Lending Facility (MLF) rates unchanged at 2.75%, per the latest update. Additionally, the Chinese central bank also released its quarterly economic report stating that China’s economy isn’t experiencing deflation and that economic growth is set to rebound sharply.

The US policymakers appear somewhat optimistic about extending the debt ceiling limit before the June expiry. Wall Street closed with mild gains and the US Treasury bond yields dribbled in a positive territory. That said, the US Dollar Index (DXY) snapped a two-day uptrend while retreating from the five-week high.

The market’s cautious mood recently prod the XAU/USD bulls. It’s worth noting that the pre-data anxiety ahead of the key US fiscal talks and China’s Retail Sales and Industrial Production for April, as well as the US Retail Sales for the said month, appear to weigh on the gold price.

Latest comments from United States House Speaker Kevin McCarthy saying, “I don’t think we’re in a good place,” also seem to weigh on the Gold price, via fears of deadlock on the US debt ceiling extension as Republicans may stick to their demand.

The previous monthly high of near $2,048 may check the XAU/USD run-up before directing the bulls to the recently flashed record top near $2,080.