Gold price fails to capitalize on Friday's recovery, trading with limited gains/minor losses at the start of the new week. XAU/USD remains steady around the $1,980 level, showing a slight upward trend for the second consecutive day.
The US Dollar (USD) sees dip-buying on Monday, interrupting Friday's retracement slide from a two-month high. This, coupled with optimism regarding US-China relations, acts as a headwind for the Gold price denominated in USD. However, concerns over global growth slowdown and US debt ceiling negotiations prevent a bullish sentiment.
Negotiations regarding the US government's debt ceiling suddenly broke down last week, raising doubts about an imminent deal and leading to concerns about a possible American debt default. Additionally, less hawkish comments from Federal Reserve Chair Jerome Powell hinder the USD and provide support for the safe-haven Gold price. Powell's statements suggest caution regarding interest rate hikes.
Powell's remarks indicate a more cautious approach to interest rate hikes, causing a decline in US Treasury bond yields. This lack of aggressive USD buying restricts the downside for the Gold price, which does not offer yield. However, caution is advised due to limited buying activity before positioning for further appreciation.
Market focus turns to a crucial meeting between President Joe Biden and House Republican Speaker Kevin McCarthy to discuss the debt ceiling. Additionally, US bond yields will influence USD dynamics and impact the Gold price. Traders will monitor broader risk sentiment ahead of the release of flash US PMI prints and the FOMC meeting minutes later in the week.
The unexpected breakdown in US debt ceiling negotiations and concerns over a potential American debt default have created uncertainty in the forex market. Forex traders are closely monitoring the situation as it affects the value of the US Dollar (USD) and other major currencies. In this context, the Gold price, denominated in USD, is also influenced by these developments. Traders are assessing the impact of these events on global growth and risk sentiment, which in turn affect forex trading strategies. The market's reaction to the debt ceiling situation and its resolution, along with other economic factors, will continue to shape forex trends in the coming days.