Bullion attempts rebound after bruising week

Gold has been dragged below the psychologically-important $2,000 level this week due to optimism surrounding a US debt deal, while markets also ramped up bets of a Fed rate hike in June.

Although spot gold is recovering slightly after finding support around the mid-$1900s, the same region where bulls and bears did battle in early February and late March, it remains on course for its largest weekly loss since February.

From a technical perspective:

• POTENTIAL SUPPORT: Should the $1950 region fail as a critical support level, that may open more room for bears to test stronger support at $1934.19, with its 100-day simple moving average (SMA) lying further south.
   
• POTENTIAL RESISTANCE: If this ongoing rebound has legs to it, overcoming the $1975 resistance region may invite stronger resistance at its 50-day SMA.

 

Still, it appears that the zero-yielding asset remains supported by persistent hopes that the Fed can follow through with rate cuts in Q4.

The precious metal may yet soar once more if the present optimism surrounding a US debt deal proves to be unfounded.

Although it is not the market’s base case at present, a catastrophic first-ever US default should pave the way for a new record high for gold.