Gold prices trended cautiously on Monday as investors and traders braced for the release of the consumer price inflation data on Tuesday.

Spot gold was trading 0.16% higher at $2,024.60 per ounce during Tuesday afternoon Asian trade. Ajay Kedia, director at Mumbai-based Kedia Commodities told Reuters if the inflation report comes in hot and sparks concerns about another rate hike in June by the Federal Reserve, the price of the yellow metal could eventually drop to the $1,950-$1,920 level.

The SPDR Gold Trust (NYSE:GLD) and the iShares Gold Trust (NYSE:IAU) closed over 0.1% higher on Monday.

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Another factor that could impact gold prices is the banking sector crisis. “If there is news of further stress in the banking sector, we will see gold move towards the $2,100 level,” Kedia said.

This is because gold acts as a safe haven in times of distress and any signs of turmoil in the economy would send investors into a risk-off mode, driving fund flows into the yellow metal.

Debt Ceiling: Meanwhile, the debt ceiling saga is also among the most watched events in current times that will determine the direction of markets and investor sentiments.

President Joe Biden and House Speaker Kevin McCarthy are scheduled to meet on Tuesday in regard to the debt ceiling crisis.

However, the National Association of Government Employees Inc. (NAGE) – a union representing 75,000 federal agency and military employees – reportedly sued President Joe Biden and Treasury Secretary Janet Yellen on Monday and have asked a federal judge to order Yellen to continue borrowing if talks to raise the national debt ceiling fail.

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