Gold prices fall in early trade

31 May 2023 , 10:16 AM

As a result of anticipation that the Federal Reserve will likely increase interest rates further and euphoria about the U.S. debt deal, gold prices on Wednesday were on track to experience their first monthly decline in three months.

Spot gold remained unchanged at $1,958.02 per ounce, but it has down 1.6% this month. American gold futures were stable at $1,957.80.

Top Republican in Congress Kevin McCarthy on Tuesday urged his party’s members to back a bipartisan agreement to raise the $31.4 trillion debt ceiling for the United States, while a significant party hardliner said he would probably support the bill in a crucial procedural vote.

As economic data exceeds expectations and politicians appear to have achieved an agreement to lift the debt ceiling, Fed funds futures traders now believe that the Fed will raise interest rates rather than leave them steady next month.

As of right now, the market is pricing in a 66.6% chance of a 25-basis-point rise at the Fed meeting on June 13–14. Bullion with a zero yield loses some of its attraction when interest rates rise.

Tom Barkin, president of the Richmond Federal Reserve, added that rather than being pushed back to near zero in every slowdown, the U.S. economy might support interest rates at a ‘neutral, normal level’ once the present inflation shock has passed.

The Chinese purchasing managers index statistics, which will provide the first glimpse into industrial and service sector activity in May in the second-largest economy in the world and the top consumer of gold, will be the focus of the Asian market on Wednesday.

Spot silver was essentially unchanged at $23.2019 per ounce, platinum increased by 0.7% to $1,021.08, and palladium increased by 0.8% to $1,412.15 on the day, but all metals were expected to experience monthly declines.

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