Gold price (XAU/USD) licks its wounds around $2,015 amid early Asian session on Friday, after declining in the last two consecutive days. In doing so, the precious metal bears the birden of the market’s risk-off mood, which in turn underpins the US Dollar demand, while preparing for the first weekly loss in three. Among the main culprits, fears of the United States default and mixed US data, mostly downbeat, seems to have weighed on the sentiment and the XAU/USD.

Gold price bears the burden of risk-off mood

Gold price remained pressured on Thursday for the second consecutive day despite the softer United States economics. The reason could be linked to the market’s rush towards the US Dollar amid fears of the US debt ceiling expiry and banking fallouts.

Among the latest negatives on the matter is the postponement of the debt ceiling talks between US President Joe Biden and House Speaker McCarthy. “A debt limit meeting between US President Joe Biden and top lawmakers that had been scheduled for Friday has been postponed, and the leaders agreed to meet early next week, a White House spokesperson said on Thursday,” reported Reuters.

The news becomes all the more important and negatively impacts the risk appetite as the US Treasury Department has already signaled the Federal Government’s likely default as soon as June 1 unless the debt ceiling is raised. Also increasing the intensity of the news is the fact the US President Biden is set to attend the G7 meeting in Japan the next week.

Previously, US Treasury Secretary Janet Yellen reiterated her warning that the “US default would threaten US recovery, sparking a global downturn that would set us back much further,” on early Thursday. On the same line was Beth Hammack, Chair of the Treasury Borrowing Advisory Committee and Co-Head of Goldman's Global Financing Group, who said recently that a political deadlock over the US debt ceiling poses a "real risk" for the USD. 

On the other hand is the Reuters’ news saying that around 113 of the largest U.S. lenders will bear the cost of replenishing a deposit insurance fund that was drained of $16 billion by recent bank failures, per the Federal Deposit Insurance Corporation (FDIC).

Apart from the fears emanating from the US debt-ceiling expiration and banking woes, the likely stronger return of the US-China tension also weigh on the market sentiment and the Gold price. On Thursday, US Treasury Secretary Janet Yellen said that the Biden administration has been discussing restrictions on outbound investment to China for some time. Earlier in the week, China’s Foreign Ministry reiterated its dislike for the US intervention in the Taiwan issue.

While portraying the mood, Wall Street edged lower whereas the US 10-year and two-year  Treasury bond yields also dropped in the last two consecutive days, which in turn allowed the US Dollar Index to print a two-day winning streak to 102.07 at the latest.