Gold near two-month low as US debt deal dents appeal

Bengaluru — Gold prices traded in a narrow range on Tuesday, hovering close to a recent two-month low, as optimism over a US debt-ceiling deal and reduced bets for a pause in the Federal Reserve’s rate hike policy in June dented the metal’s appeal.

Spot gold was flat at $1,945.19 an ounce by 2.53am GMT. US gold futures were listless at $1,944.10.

US President Joe Biden said on Monday he felt good about prospects for passage by Congress of the debt-ceiling deal that he reached with House of Representatives speaker Kevin McCarthy.

The high volatility events such as the US regional banking crisis, and whether an agreement would be reached on raising the US debt ceiling were now passing, “reducing the markets interest in gold as investors seek alpha”, Michael Langford, director at corporate advisory AirGuide said.

Fed officials on the other hand have in recent days turned up the heat with a hawkish outlook on interest rates, and that has to some extent also offset safe-haven flows around the US debt-ceiling situation as higher interest rates dull the appeal for zero-yield bullion.

Having navigated the financial crisis of 2008, Minneapolis Fed president Neel Kashkari worries about systemic risks. But now, as a US monetary policymaker, he worries even more about inflation.

“If later in the year a more dovish approach is taken, this then implies some level of easing of interest rates may occur, which will be seen as bullish for equities and also reduce the desire for investors to hold gold versus other more risk on asset classes,” Langford said.

Markets are pricing in a 42.7% chance of the Fed keeping rates on hold in June.

Spot silver fell 0.2% to $23.15 an ounce, while platinum rose 0.8% to $1,032.54, and palladium gained nearly 2% to $1,443.12.

Reuters