Gold prices dip on US debt ceiling deal, Fed rate-hike bets

29 May 2023 , 10:48 AM

Gold prices declined on Monday as concerns about higher interest rates lasting longer along with a tentative agreement reached over the weekend to suspend the U.S. debt ceiling impacted on the attraction of the non-yielding metal.

Spot gold was trading near two-month lows reached on Friday, down 0.3% at $1,941.45 per ounce. American gold futures decreased 0.2% to $1,940.70.

Due to the dollar’s 0.1% increase, bullion became more expensive for owners of other currencies.

On Sunday, U.S. President Joe Biden announced that he and House Speaker Kevin McCarthy had reached an agreement on a budget that would postpone the $31.4 trillion debt ceiling until Jan. 1, 2025, and that the plan was now ready for a vote in Congress.

According to data released on Friday, U.S. consumer spending climbed more than forecast in April, improving the outlook for the second quarter’s economic growth. At the same time, inflation increased.

According to the CME FedWatch tool, the report increased the likelihood that the U.S. central bank will raise interest rates by 25 basis points in June and that they will remain there for the remainder of the year to 64.2%.

When interest rates increase, investors tend to lose interest in gold, which has no inherent income.

On Monday, U.S. stock futures and Asian equities increased after a deal to suspend the U.S. government’s debt ceiling, ending months of uncertainty for investors.

Spot silver prices decreased by 0.3% to $23.25 an ounce, while platinum prices nudged down by 0.2% to $1,020.11 and palladium prices increased by 0.3% to $1,427.39.

Due to the Memorial Day vacation, U.S. markets will be closed on Monday.

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