Gold Price Forecast: XAU/USD recovery hinges on $1,995 breakout, US debt limit optimism

• Gold price prints corrective bounce from three-week low to snap two-day losing streak.
• Retreat in yields, market’s cautious mood allows XAU/USD to lick its wounds.
• US Dollar’s struggle with 100-DMA amid Target Corp-linked markets fears prod Gold sellers.
• Convergence of 50-HMA, previous support line limited immediate upside with eyes on US debt limit, Fed news.

Gold price (XAU/USD) clings to mild gains around $1,985 as it licks its wounds near the lowest levels in three weeks, snapping a two-day downtrend amid early Thursday in Europe. In doing so, the yellow metal benefits from the US Dollar’s struggle to extend the latest run-up at the multi-day top amid mixed sentiment surrounding the default conditions and fears of easing retail sales in the US.

That said, US President Joe Biden and House Speaker Kevin McCarthy managed to convince the markets that they can unite to avoid the ‘catastrophic’ default, which in turn underpinned the market’s risk-on mood and propelled the US Dollar. The greenback’s run-up also took clues from mostly upbeat US data and hawkish Fed talks.

However, the cautious mood due to the nearness to the US debt ceiling expiry of early June and doubts about the US diplomats’ ability to strike a deal on multiple issues that can help solve the debt-limit problem seem to weigh on the sentiment and the US Dollar.

On the same line are fears of easing US statistics as Reuters said that US retail sales have remained resilient despite higher prices but consumers have been careful about their spending, hurting companies such as Target and Home Depot, whose merchandise largely consists of discretionary products. The same joins the Fed’s dovish hike to prod the US Dollar bulls.

Amid these plays, US Dollar Index (DXY) buyers struggle to keep the reins at the highest levels in seven weeks, sluggish near 102.85-80 by the press time. Elsewhere, S&P500 Futures print mild losses despite the upbeat Wall Street close whereas the US Treasury bond yields remain sidelined at the multi-day top. That said, the US 10-year and two-year Treasury bond yields rose to the highest levels since May 01 and April 24 while portraying a four-day uptrend near 3.57% and 4.16% respectively, easing to 3.55% and 4.13% by the press time.

Moving ahead, a lack of major data/events may allow the Gold price to cover but the risk catalysts are the key to watch for clear directions.

Gold price technical analysis

Although the oversold RSI (14) line allowed the Gold price to recover from a three-week low, backed by the bullish MACD signals, a convergence of the 50-Hour Moving Average (HMA) and the support-turned-resistance line from April 27, close to $1,995 by the press time, appears a tough nut to crack for the bulls.

Even if the XAU/USD manages to rise past $1,995, the $2,000 psychological magnet and the previous resistance line from May 03, close to $2,010 at the latest, could challenge the Gold buyers.

Meanwhile, the Gold Price pullback remains elusive unless it breaks the three-week-old horizontal support area surrounding $1,975-74.

It’s worth mentioning that the mid-April low of near $1,969 and the previous monthly bottom of around $1,950 are some extra filters toward the south.

To sum up, the Gold price recovery remains unimpressive below $2,010.

Gold price: Hourly chart

Trend: Pullback expected