Economic summary on May 23: Gold price turns down as USD increases, US public debt concerns still dominate

Gold prices fall below $3,300 as the dollar strengthens after positive US economic data

Gold (XAU/USD) fell below $3,300 an ounce in North American trading on Thursday, after hitting a two-week high of $3,345 earlier in the day, helped by a strong recovery in the US dollar after the release of preliminary PMI data for May that beat expectations.

The composite PMI rose to 52.1 from 50.6 the previous month, indicating that the U.S. private sector is expanding at a faster pace. The marked improvement in both the manufacturing and services sectors boosted economic confidence, pushing the U.S. dollar index (DXY) up to near 99.90 — a sharp rebound from a recent low of 99.35.

Technically, a stronger US dollar makes gold more expensive for investors holding other currencies, putting downward pressure on precious metal prices.

However, the long-term outlook for gold remains positive. Lingering concerns about the US debt burden continue to fuel safe-haven demand, keeping the US dollar and government bonds weak for some time.

In addition, the not-so-optimistic outlook for ceasefire talks between Russia and Ukraine also supported gold prices. Geopolitical tensions remain a key factor maintaining the appeal of gold as a safe haven asset in times of uncertainty.

The US House of Representatives has passed President Donald Trump's tax cut bill.

The US House of Representatives has passed President Donald Trump's tax cut bill and sent it to the Senate. The bill is expected to add $3.8 trillion to the national debt over 10 years, according to estimates by the Congressional Budget Office.

Analysts warn that the tax bill's passage could exacerbate the fiscal deficit crisis, pushing up the US government's interest payments at a time when the economy is already under pressure from inflation and tariffs. Moody's has already downgraded the US sovereign credit rating to Aaa from Aa1 due to persistent fiscal imbalances and a lack of consensus in Congress on solutions.

In the US domestic market, investor sentiment remains affected by the risk of economic stagnation. JPMorgan Chase CEO Jamie Dimon expressed his agreement with the Federal Reserve's view on keeping interest rates unchanged.

According to him, the Fed is doing the right thing by "waiting and watching" in a context where the economy faces many uncertain factors such as geopolitics, budget deficits and price pressures.

Although gold is often seen as a safe haven asset during times of inflation, persistently high interest rates make the precious metal less attractive compared to income-bearing assets.

US unemployment claims lower than expected

A slight bright spot from the labor market was that the number of unemployment benefits applications in the US in the week ending May 16 was lower than expected, reaching 227,000 applications - showing that the labor market remains stable.

According to the latest report from the US Department of Labor, the number of people filing for unemployment benefits for the first time in the week ending May 17 was 227,000, down slightly by 2,000 from the previous week. This figure was also lower than analysts' forecasts, which expected it to be at 230,000.

In addition, the four-week average - often considered a more stable measure because it limits weekly fluctuations - also increased only slightly to 231,500 compared to 230,500 the previous week.

Regarding the number of people continuing to receive unemployment benefits (who filed in previous weeks), this number increased to 1.903 million in the week ending May 10, higher than 1.867 million in the previous week.

Geopolitically, hopes for a ceasefire between Russia and Ukraine are fading. According to the Wall Street Journal, in a private meeting with European leaders, President Trump said that Mr. Putin would not agree to a ceasefire because he believes Russia has the advantage on the battlefield.

This contradicts Mr. Trump's statement earlier this week on the social network Truth Social that the two sides had agreed to hold peace talks at the Vatican, although he did not specify a specific time.

Overall, the market is still dominated by opposing factors: on one side, concerns about public debt and international tensions, which support gold; on the other side, positive economic data and a stronger USD put downward pressure on prices.

In the short term, gold is likely to continue to fluctuate within a narrow range, depending on further developments from both the US and global hotspots.