Gold prices rose on Monday, as the stagnation of the US debt ceiling crisis and fears of an economic slowdown directed some investors towards the safe-haven metal.
Gold and the dollar now
Gold futures settled at 2019 dollars an ounce.
While spot contracts for gold increased by 0.2% to 2015 dollars an ounce
As for the dollar, it fell by 0.05% to 102.45 points.
Gold prices fell at the settlement of transactions, on Friday, due to the rise of the dollar to the highest level in a month.
Upon settlement, futures contracts for the yellow metal for June delivery fell slightly by 0.03%, or seventy cents, to reach $2019.8 an ounce, after reaching $2005.70 during the session, recording a weekly loss of 0.2%, after two weeks of gains.
Gold may go back to 2000
Yap John Rong, market analyst at IG, said the recent negative surprises in US economic data raised the chances of a recession in the next 12 months, as it boosted safe-haven flows.
The consumer confidence index declined in May by 9.1% on a monthly basis, which means erasing more than half of the gains achieved after an all-time low last June, with the spread of negative news about the economy, including the debt crisis, while inflation expectations rose. In the long run, it rose to its highest reading since 2011 at 3.2%.
Spot gold may end its rebound around resistance at $2031 an ounce, before resuming its decline towards $2003, according to Reuters technical analyst Wang Tao.
Gold maintained recent gains, with the precious metal trading just below its record high, coinciding with the market's assessment of the Fed's next move, ANZ Bank said in a note.
Federal Reserve Board member Michele Bowman said that continued high inflation and a strong labor market suggest the need for further tightening of monetary policy to reach a sufficiently constraining stance for some time to reduce inflation and create conditions that would support a sustainable labor market.
Markets are pricing in an 83.4% chance of a US central bank at the current level in June, according to CME FedWatch.
However, gold lost some of its luster due to the rise of the dollar index to its highest level in five weeks against major currencies, which increases the cost of buying gold for holders of other currencies.
Debt ceiling crisis:
US President Joe Biden said he expects to meet congressional leaders on Tuesday for talks on a plan to raise the country's debt limit and avoid default.
Bullion tends to increase during times of economic or financial uncertainty, but higher interest rates reduce the attractiveness of non-yielding gold.
The Congressional Budget Office said the deadline for the federal government to default on all its obligations could be within the first two weeks of June, if the debt ceiling remains unchanged.
It comes as top political and financial figures lined up to offer warnings about what might happen if the debt ceiling impasse is not resolved. President Joe Biden said: The whole world is in trouble. As Jamie Dimon, head of JPMorgan (NYSE:JPM) Chase & Co., expressed his opinion, saying: It is likely to be disastrous. While the International Monetary Fund warned, the United States defaulted on debt that it would have very serious repercussions.
Jason Blum, head of fixed income, alternatives and ETF strategies at Invesco (NYSE:IVZ), sees the stakes as higher than ever, given the polarization of voters and Congress on both sides. He said the way the polarization is taking place on both sides means there is a risk that they will not work together in time.
