XAUUSD: What's next for this week?

A combination of factors should cap gains for XAUUSD

Optimism about reaching a deal to lift the US debt ceiling has led to elevated US Treasury bond yields, which benefits USD bulls and could limit gains for non-yielding Gold prices. This comes after top US congressional Republican Kevin McCarthy announced negotiations are progressing, with a bill to raise the government's 31.4$ trillion debt ceiling expected to be presented next week. This has eased concerns about the world's largest economy defaulting, boosting investor confidence and contributing to a positive tone around equity markets. As a result, the safe-haven XAU/USD may not experience significant upside, and bullish traders should exercise caution and position for a potential intraday appreciation.

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Focus remains on Fed Chair Jerome Powell’s appearance

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The US Dollar (USD) attracts some dip-buying on Monday and for now, seems to have stalled Friday's retracement slide from a two-month high. This, along with the optimism over a potential improvement in relations between the United States (US) and China, acts as a headwind for the US Dollar-denominated Gold price. In fact, US President Joe Biden said during the Group of Seven (G7) summit in Japan that he expects US-China relations to improve very shortly. This, however, is overshadowed by worries over slowing global growth and a surprise breakdown in the US debt ceiling negotiations.