Gold Price Forecast: XAU/USD bears eye downside continuation to key support

• Gold price bears are eyeing a continuation to the daily support area.
• Gold price pressured by a resurgence in the US Dollar.

Gold price traded by over 1% lower for a third-straight session on Thursday as the US Dollar continues to strengthen and bond yields rise. The US Dollar index was last seen up 0.69 points to 103.55, making gold more expensive for international buyers, and is poised for the largest weekly percentage drop since October.

Gold price fell to a low of $1,957.50 from a high of $1,986.07. Bond yields also climbed, with the US two-year note last seen paying 4.241%, up 7.7 basis points, while the 10-year note was up 7.3 basis points to 3.642%.

The drop in the Gold price comes as the greenback rises with talks between the Whitehouse and Congress over raising the debt ceiling continue, with investors eyeing the possibility of a default on US debt should talks fail. President Joe Biden and Speaker of the House Kevin McCarthy reiterated their aim to strike a deal soon to raise the $31.4 trillion federal debt ceiling and agreed to talk as soon as Sunday. President Joe Biden on Wednesday said he was confident of reaching a deal to avoid defaulting on US debt.  McCarthy said a debt-ceiling deal might be "doable" by Sunday. However, market experts cautioned that reaching a deal is merely the first step in what could be a fraught process.

The debt ceiling has drawn attention away from uncertainty about the Federal Reserve's stance on interest rates, but economic data showed the number of Americans filing new claims for jobless benefits fell more than expected last week, suggesting the labor market remains tight, giving the Fed more cushion to continue raising rates.  In the week ended 13 May, Initial Claims fell 22k to 242k. That was 4k below the same week in April and points to another strong labour market report. ´´The current strength of the labour market does not support the Federal Reserve view that unemployment rate will lift to 4.5% by year-end,´´ analysts at ANZ Bank explained. 

Meanwhile, Dallas Federal Reserve Bank President Lorie Logan and Fed Governor Philip Jefferson said on Thursday the economy does not appear to be softening fast enough for the central bank to pause its rate hike cycle.

´´Without an additional macro catalyst, we expect discretionary trader flow tied to market expectations for a deepening Fed cutting cycle over the next year to support gold towards new cycle highs over the coming months,´´ analysts at TD Securities said. 

Gold technical analysis

The Gold price could be leveling out here but the bulls will need to get on the backside of the bearish trendline. In any case, the bears eye an eventual move toward the support area: