Gold Price Forecast: XAU/USD climbs above $1,980 as uncertainty over US debt-ceiling raise soars

• Gold price has climbed strongly above $1,980.00 ahead of US debt-ceiling talks.
• US Biden might require to call for his 14^th amendment right to save the economy from default.
• Fed’s Powell said on Friday that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates.

Gold price (XAU/USD) has shifted comfortably above the critical resistance of $1,980.00 in the Tokyo session. The precious metal has got immense strength as the US debt-ceiling talks between the White House and Republicans are failing to reach a deal. Also, a consideration of a steady interest rate policy by the Federal Reserve (Fed) is fueling strength in the Gold bulls.

S&P500 futures have recovered the majority of losses generated in early Asia. However, the overall market mood is cautionary as no deal between US President Joe Biden and House of Representatives Speaker Kevin McCarthy would push the former into the corner. US Biden might require to call for his 14^th amendment right to save the economy from default.

The US Dollar Index (DXY) has refreshed its day’s low at 102.96 as the Fed is expected to hold its interest rate policy as tight credit conditions by the US regional banks are effectively weighing pressure on inflation.

Fed’s Powell said on Friday that the recent banking crisis, which led to tighter credit standards, has eased the pressure to hike interest rates. He further added, "Our policy rate may not need to rise as much as it would have otherwise.”

Going forward, preliminary S&P US PMI (May) will remain in the spotlight. Manufacturing PMI is seen declining to 50.0 from the former release of 50.4. The Services PMI is expected to remain steady at 53.6.

Gold technical analysis

Gold price has climbed back above the potential resistance, which has turned into support, plotted from April 19 low at $1,969.26 on a four-hour scale. The precious metal showed a V-shape recovery from around $1,950.00 amid the emergence of responsive buyers.

A confident sustainability above the 20-period Exponential Moving Average (EMA) at $1,980.00 will turn the short-term trend positive.

The Relative Strength Index (RSI) (14) has returned into the 40.00-60.00 range swiftly, which indicates a bullish reversal.

Gold four-hour chart