Huitong Financial APP – Spot gold traded lower on Monday (May 1) but again found significant support in the $1,980 to $1,970 range as cautious investors awaited the Federal Reserve’s upcoming new policy announcement later this week. Since late April, Gold price Six sessions fell into those ranges, but all ended above them. At 20:12 Beijing time, spot gold fell 0.06% to $1,989.78 / oz; The main COMEX gold contract fell 0.01 percent to $1,998.9 an ounce. The dollar index rose 0.22% to 101.831. Data released on Friday highlighted that underlying inflationary pressures in the US remain strong. The Federal Open Market Committee meets on May 2-3 and investors widely expect the Fed to have no choice but to continue raising interest rates by 25 basis points to 5.00 percent to 5.25 percent. But this could be the last rate hike in the Fed’s tightening cycle. With most economists predicting a recession, it puts Fed policymakers in an awkward position whether to keep fighting inflation or try to ease the slowdown. That is likely to be hotly debated at the May meeting, given conflicting views on the need for further rate rises. James Bullard, the hawkish president of the St. Louis Fed, has urged a rate hike to a range of 5.5 percent to 5.75 percent, arguing that the economy is resilient and that banking woes will not be too costly. That sentiment was echoed by Minneapolis Fed President Neel Kashkari and Fed Governor Rob Waller. But the dovish Chicago Fed Chairman Goolsbee called for “prudence and patience” in assessing the economic impact of banking stress. Philadelphia Fed President Harker warned that the Fed could also cause an “accident” by raising rates too far. “This could be a pivotal meeting,” said Diane Swonk, chief economist at accounting firm KPMG. We are approaching the toughest ride for the Fed in this marathon race — an intensification of strong resistance to further rate hikes that no one at the Fed has ever experienced.” In addition to the Fed’s rate decision, the market will also get the April non-farm payrolls report this week. Nonfarm payrolls are expected to have risen 181,000 in April, after rising 236,000 in March. A payrolls number close to 100,000 or below should be positive for gold. Ilya Spivak, head of global macro at Tastylive, said: “If the Fed surprises on the hawkish side, it doesn’t bode well for gold. However, I don’t see gold breaking below $1,930 support. “If we see a significant downturn in US economic data that raises expectations of rate cuts in the second half of the year, then gold could climb above $2,000.” Banking crisis The US economy has been hit by a credit crunch following the collapse of Silicon Valley Bank and Signature Bank. That amounts to an additional Fed rate hike of at least 50 basis points, according to related surveys, leading to tighter conditions in loan categories, particularly commercial real estate, where significant losses are expected. It emerged at the weekend that buyers including jpmorgan Chase and PNC, the financial services group, had submitted final bids for First Peace Bank in an auction run by the Federal Deposit Insurance Corporation. The news temporarily eased concerns about the U.S. banking sector and briefly weighed on gold prices. Us regulators said on Monday that First Grand Harmony had been taken over and agreed to sell the bank to jpmorgan Chase & Co. It would be the third major US institution to fail in two months. The move comes less than two months after a run on Silicon Valley Bank and Signature Bank collapsed. The Fed then took emergency steps to stabilize markets. But the first bank auction will be closely watched to see how much support the government will have to provide. The move came after regulators took the extraordinary step of insuring all deposits at Silicon Valley Bank and Signature Bank amid fears of further bank runs. The FDIC said in a statement that as of April 13, the bank had total assets of $229.1 billion and deposits valued at $103.9 billion. The FDIC also estimated the cost of the deposit insurance fund at about $13 billion, with the final cost to be determined when the FDIC ends the takeover. It remains to be seen whether regulators would also have to insure all deposits at First Bank, which would require the approval of the Treasury secretary, the president and a supermajority of the Fed and FDIC boards. But the immediate protection of banks by the private sector would not solve the broader banking problems and would raise fears of such action by large public banks in the future, and the turmoil in the banking sector would continue to support gold prices Go strong. Debt ceiling Another big wild card is the looming U.S. debt ceiling. While the Republican-controlled House passed a sweeping debt-ceiling and spending cuts package last week, it has barely passed the Democratic-controlled Senate, and the two parties have yet to adjust their positions on the debt ceiling. If Congress fails to raise the debt ceiling, the US government could default in the coming months, which could plunge the country into economic crisis and damage its international credibility. Moody’s Analytics has warned that a default could trigger a 2008-style economic catastrophe, wiping out millions of jobs and setting the United States back for generations. The cost of insuring U.S. debt against default for one year topped 106 basis points as of April 21, the highest since 2008 and well above levels seen in 2011, when the standoff over the debt ceiling triggered the first downgrade of the U.S. government’s credit rating, according to data from Leufus. The “significant” risk of a technical default in the US is expected to provide upward momentum for gold in the medium to long term, although in the short term it remains to be wary of the impact of a barrage of hawkish comments from Fed officials. Technical focus on the lower edge of the channel support On the daily line, the gold price since late March opened the upward shock channel faces the risk of failure. If the day ends below the lower end of the channel, gold could fall below the April 19 low of $1,969 in the afternoon and further test the April 3 low of $1,949. Conversely, gold prices continue to rise in the afternoon, is expected to return to $2000 above. 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