Markets have remained range-bound over the past week, with the ASX200 remaining smack in the middle of its May range of circa 7,150-7,350 and the US’ S&P 500 showing a similar pattern. At the same time, volatility has been on the rise over past days and gold seems to remain well supported just under US$2,000/oz.

All of this likely reflects the elephant in the room – the looming US debt ceiling deadline threatening a US government default in just over one week. 

As investors are waking up to the risk that policymakers may not be able to come to an agreement in time, profit-taking is on the rise and European and US markets fell on Tuesday afternoon following reports President Biden and the Republican leader Kevin McCarthy failed to strike a deal. 

Correspondingly, the cost of insuring US debt against a default for one year (as indicated through credit default swaps; CDS), has risen to a high of over 150 basis points – ten times where it traded a year ago.

Recent economic data releases have not been helpful either, with some European surveys indicating that price pressures may be more persistent than expected, thereby raising the possibility of more rate increases to come. 

In the UK, where inflation prints are still coming in above 10%, Gilt yields followed suit, and the 10-year Gilt yield rose to 4.17% (23/5/23) – just 33 basis points shy of its steep spike observed during the UK budget crisis which shook global markets last October.

Many investors look to gold as a safe haven in times of uncertainty and/or as a hedge against inflation. The precious metal rallied almost 20% between November 2022 and early May 2023 which is why we saw the need to update our Gold Industry Review and run the second session of our Gold Summit. Read the review here or watch the replay here.

The ASX 200 (XJO) shows that the market has been experiencing a period of consolidation, with a clear range between support at approximately 6,946 and resistance around 7,364. This sideways movement indicates a lack of decisive momentum from buyers and sellers, leading to a balanced market sentiment.

The technical indicators on the chart reflect this lack of momentum. The Relative Strength Index (RSI) hovers around the midpoint of 50, indicating a neutral stance. Additionally, the Average True Range (ATR) remains relatively low, suggesting limited volatility in recent weeks. The presence of the 50-day moving average above the 200-day moving average may suggest a bullish bias, but the range-bound nature of the market makes it challenging to predict the direction of the next significant move.

Traders and investors should closely monitor the key support and resistance levels for potential trading opportunities. A breakout above the resistance level at 7,364 could signify a continuation of the bullish trend and potentially lead to further upside movement. Conversely, a breakdown below the support level at 6,946 could indicate a bearish reversal, potentially triggering a downward move. As the market remains range-bound and lacks clear directional bias, it is important to exercise caution and wait for a decisive breakout or breakdown before expecting significant future movements.

Next Thursday, 1st June at 12pm (AEST) we will be joined by Anthony Reilly, CEO of Felix Gold (ASX: FXG), a premium gold exploration business drilling for multi-million ounce deposits in the Fairbanks District of Alaska. 

Anthony will outline the progress being made at Fairbanks, where drilling is expected to commence imminently, and provide a wider company update. Click here to book your spot or request the replay.

Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Felix Gold Ltd and may receive fees for its services.

Past performance is not a reliable indicator of future performance.