Gold Price Forecast: XAU/USD dives to $1,960, lowest since April amid sustained USD buying

• Gold price remains under heavy selling pressure on Thursday and drops to its lowest level since April.
• The USD jumps to a nearly two-month top and turns out to be a key factor weighing on the XAU/USD.
• The optimism over the US debt ceiling contributes to driving flows away from the safe-haven metal.

Gold price continues drifting lower for the third successive day on Thursday - also marking the sixth day of a negative move in the previous seven - and dives to its highest level since April 03 during the early North American session. The XAU/USD is currently placed around the $1,960-$1,961 region, down over 1% for the day, and seems poised to prolong its recent sharp retracement slide from the all-time high touched earlier this month.

A combination of supporting factors pushes the US Dollar (USD) to a nearly two-month high, which, in turn, is seen weighing heavily on the Gold price. Against the backdrop of the recent hawkish signals from several Federal Reserve (Fed) officials, the optimism over the potential lifting of the US debt ceiling remains supportive of the elevated US Treasury bond yields and acts as a tailwind for the Greenback. The intraday USD buying picks up pace following the release of the mostly upbeat US macro data, which showed that Initial Jobless Claims fell to 242K last week and the Philly Fed Manufacturing Index improved to -10.4 in May from -31.3 previous.

Adding to this, Dallas Fed President Lorie Logan said that the economic data points so far don’t justify skipping a rate increase at the central bank’s next meeting in June. This, in turn, reaffirms expectations that the US central bank will keep rates higher for longer and contributes to driving flows away from the non-yielding Gold price. Meanwhile, US President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach an agreement soon to raise the federal government’s $31.4 trillion debt ceiling. This helps calm market fears of an unprecedented American debt default and undermines the safe-haven metal.

Apart from this, the downfall could further be attributed to some technical selling following the overnight breakdown through the $1,980 horizontal support. A subsequent slide below the $1,970 level could be seen as a fresh trigger for bearish traders and might have already set the stage for a further near-term depreciating move. Hence, some follow-through decline towards the $1,950-$1,948 intermediate support, en route to the 100-day Simple Moving Average (SMA), currently pegged near the $1,925 area, looks like a distinct possibility.

Technical levels to watch