Gold may continue to decline this week, with resistance at 1977 and 1944 and support at 1910 and 1806. The divergence among Fed officials on further rate hikes, and the fading of the US debt ceiling crisis have dragged down gold prices. While there is no reversal in the overall upward trend of gold based on CFTC positioning data and technical analysis, there is a risk of a short-term correction.

Last week (5.22-5.28), precious metals were in a downward consolidation phase, among which, Gold dropped 0.7%,and silver fell 1.4% in a single week. Gold closed the week below its lowest recent level around 1946. 

【Source: MacroMicro, The Performance of Major Precious Metals during May 22-28 】

On May 24th, the Fed released the minutes of its May policy meeting, which revealed divergent views among officials on whether or not to further raise interest rates. Some officials believed that if the inflation fell as expected and economic growth slowed, there would be no need to raise interest rates in the future, while others felt that since the 2% inflation target had not yet been reached, monetary tightening was still necessary.

In addition, Fed officials stressed that the further monetary policy will depend on recent economic data. It is worth noting that the meeting also revealed that due to domestic credit tightening and downside risks to the US economy which is expected to experience a slight recession this year, interest rates may not be cut within this year.

Mitrade Analyst 

There is a divergence of opinions within the Fed regarding further interest rate hikes, but the possibility of a rate cut this year is basically ruled out. Recent data shows that the terminal interest rate has remained at around 5% in May. Recently, the US unemployment rate has been below 4.0% and fell to 3.4% in April. 

In addition, the banking sector's credit crisis and sluggish loan activity do not support the urgency for the Fed to further raise interest rates. Although the Fed's decision not to raise interest rates is good news for gold, the divergence among Fed officials does not affect market’s expectations for a strengthening US dollar, despite its temporary downward correction at high levels.

In fact, the current US dollar strength is mainly driven by the increase in US bond yields. Over the past few weeks, US bond yields have steadily risen. The 1-year US bond yield rose to 5.30%, and the 2-year US bond yield rose above 4.60% last Friday. The rise in these bond yields indicates that the market has lowered its expectations for interest rate cuts in the second half of the year. Therefore, gold will be further suppressed and may face continued downside risks in the short term.

On May 28th, US President Biden and Republican congressional leader McCarthy reached a preliminary agreement on raising the federal government's debt ceiling of $31.4 trillion, ending a months-long stalemate. In fact, the US debt ceiling has been continuously raised for over a century, 78 times since 1960.

However, this agreement will raise the debt ceiling for two years while limiting spending during this period and provide some additional work requirements for anti-poverty programs. It is reported that both parties have agreed to raise the debt ceiling for two years, restrict non-defense discretionary spending within 2023 baseline levels for one year, and increase it by 1% in 2025.

Mitrade Analyst 

The debt ceiling crisis has been resolved, and market concerns are fading, leading to a reduction in risk aversion sentiment that will further drag down gold price.

Recently, speculative long positions in gold have continued to decrease, mainly due to the significant rebound of the US dollar, putting further pressure on gold prices and bearish sentiment. According to the latest CFTC position updates for the week of May 17-23, speculative long positions in gold decreased by 19,082 compared to the previous period, while in gold futures contracts also decreased by 19,101 during the same period.

However, short positions also decreased by 19 compared to the previous period, indicating a simultaneous reduction in both long and short positions. This information reflects a short-term bearish sentiment towards gold, and some investors are adopting a wait-and-see attitude towards the future trend of gold.

Mitrade Analyst 

In summary, there is a continued risk of gold experiencing a downward correction in the short term due to the influence of speculative market sentiment.

Last week, gold price rebounded to around 1977 due to news stimulus but then fell back to a range of 1946-1950 and continued consolidation phase.

The 60-day MA trend is still upward and has no obvious downward trend. The 14-day RSI value of 38 is below 60 and shows a downtrend at the bottom, indicating that gold will further decline, and that bearish sentiment remains dominant. Meanwhile, the daily MACD line and short-term line have crossed over the long-term line and are trending downward, with the histogram consistently negative and gradually reaching its lowest level. There are no clear signs of a rebound, and both the DIFF, DEA, and MACD values are negative, indicating that gold is in a short-term bear market and will continue to decline.

Resistance：1975 、1806

【Source:：Investing.com,Solana news today live Gold Daily Line Chart on May 29th】

Mitrade Analyst 

Based on the analysis of various indicators, the overall upward trend of gold has not reversed, but there is a risk of downward correction this week.