Gold rises in early trade

22 May 2023 , 08:25 AM

Following less hawkish remarks by U.S. Federal Reserve Chair Jerome Powell in the previous session, gold prices increased somewhat on Monday. Uncertainty regarding the outcome of the U.S. debt ceiling vote as well as concerns about the health of the banking sector contributed to safe-haven bullion’s rise.

Spot gold had increased 0.2% to $1,979.79 per ounce, while U.S. gold futures had remained unchanged at $1,981.00.

The dollar index weakened by 0.1%, lowering the price of gold for buyers from outside. [USD/]

Following a ‘productive’ phone discussion as the president was leaving for Washington on Sunday, U.S. President Joe Biden and House Republican Speaker Kevin McCarthy agreed to meet on Monday to address the debt ceiling.

Fed Chair Powell stated on Friday that it is still unclear if U.S. interest rates will need to increase further as central bank officials weigh the difficulty in containing inflation against uncertainty about the effects of previous increases in borrowing costs and recent tightening of bank credit.

Non-interest-bearing bullion typically loses appeal in an environment with high-interest rates.

Neel Kashkari, president of the Minneapolis Fed, suggested that he might be in favour of the central bank’s next meeting in June keeping interest rates unchanged.

According to the CME FedWatch tool, markets are currently pricing in a 90.8% chance of the Fed keeping interest rates unchanged next month.

Shares of regional lenders in the United States dropped on Friday after CNN reported that Janet Yellen, the U.S. Treasury Secretary, had advised bank CEOs that additional mergers might be required as a result of a string of bank failures.

Spot silver increased by 0.1% to $23.86 an ounce, platinum remained unchanged at $1,062.94 and palladium increased by 0.2% to $1,516.50.

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