US debt limit nears, market worries grow. Focus on Biden govt.'s crucial meeting on debt limit. Spending cuts proposal approval may drop gold below $2005, oil rises $73.

US nears default, Biden and House Republicans prepare for crucial debt limit negotiation. Meeting scheduled for Tuesday, 3 PM US time (Wednesday, 3 AM Beijing time). Biden to meet with McCarthy, Senate Dem leader Schumer, Senate GOP leader McConnell, and House Dem leader Hakeem Jeffries.

There's a little over two weeks until the possibility of an unprecedented US government default. House Republicans, holding the majority, have indicated they won't vote to raise the debt limit unless Democrats agree to significant spending cuts. Failure to raise the limit could lead to federal default, causing a sharp economic downturn. The government needs to raise the debt limit to fund approved congressional spending and tax cuts.

McCarthy stated, "Their negotiations are not going well. I haven't seen any progress, and I'm genuinely concerned about our current timeline. We have significant issues to address that require approval from both chambers, and it's clear that we haven't made enough progress to get to that point."

Potential impacts of the US debt ceiling meeting:

• If the Democratic Party, represented by the Biden administration, agrees to significant spending cuts and temporarily avoids the risk of government and debt default:

1. Market concerns are alleviated, leading to a decline in gold prices.
2. Increased investor expectations for the market's future, resulting in higher demand for crude oil and an increase in oil prices.

• If the Democratic Party does not agree to spending cuts, the resolution to raise the debt ceiling will not pass, intensifying concerns about government risk and debt default, leading to a decrease in investor confidence:

1. Market forecasts a decline in the future, weakened economy causing a decrease in demand for crude oil, leading to a drop in oil prices.
2. Decreased market confidence prompts investors to seek refuge in gold, causing an increase in gold prices.

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Crude oil market analysis:

Fundamentals Analysis:

1. The US Department of Energy announced on Monday (May 15) that it plans to purchase 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) to be delivered in August, requesting sellers to submit bids by May 31. As part of efforts to counter the high oil prices at the time, the Biden administration sold a total of 180 million barrels of crude oil last year. Now, the government indicates that it will begin repurchasing to replenish the inventory when prices remain in the range of $67-72 per barrel, providing support and potentially leading to an increase in oil prices.

2. Severe wildfires in Canada have led to the closure of a significant amount of crude oil production capacity. Concerns about the potential worsening of the wildfires have pushed oil prices higher.

3. Saudi Arabia's crude oil exports have declined significantly in May, which should have driven oil prices up. However, the current market is under pressure due to concerns over the US debt ceiling crisis and lowered expectations for future economic conditions, resulting in upward pressure on oil prices being restrained.

Technical Analysis:

From the chart, it can be observed that crude oil is currently exhibiting a tightening consolidation pattern. From a technical standpoint, the Stochastic indicator shows that both lines are above 70, indicating an overbought market condition, and the upward trend is evident, suggesting that prices may be approaching or reaching a temporary high point, which could potentially lead to a market reversal or correction. The RSI indicator indicates that the market is currently in a relatively neutral state but gradually rising. This may indicate that the market could experience a period of consolidation or short-term correction before continuing its upward movement. The MACD indicator shows that bullish momentum is strengthening.

Overall, the provided indicator information suggests that the market may be in a short-term uptrend, but there are still some potential warning signals, such as the Stochastic indicator nearing overbought territory and the RSI indicator not fully recovering into the overbought zone.

In the long term, the upward momentum for oil prices remains, but for the immediate future, it is important to monitor the potential significant impact of the US debt ceiling meeting on oil prices in the next couple of days. If the spending cuts proposal is passed, oil prices may break through the $72.4-$73.4 range. If it doesn't pass, influenced by the decreased expectations for future economic conditions, oil prices could target the $70 level.

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Gold Market:

The price movement of gold has largely aligned with the forecast from last Friday, bouncing back after reaching support near the $2005 level. Currently, the price is stabilizing around the resistance level near $2016.

Technical Analysis:

From the Fibonacci retracement, it can be observed that the current gold price is supported strongly around the 38.2% level, near $2005. The price has tightened its decline, and the momentum of the upward retracement is gradually diminishing, indicating that the price will likely retest the support level around $2005.

If the decision from the meeting passes, the gold price will break below the support level, and dropping from the 38.2%-61.8% range to the 23.6%-38.2% range, between $1975 and $2006. However, if the meeting does not pass, it would drive the gold price higher, breaking above the $2030 level.

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