Gold prices edged lower on Monday as a tentative deal sealed over the weekend to suspend the U.S. debt ceiling coupled with jitters around higher-for-longer interest rates dampened demand for the non-yielding metal.
Spot gold was down 0.1% at $1,945.11 per ounce by 0442 GMT, hovering near two-month lows hit on Friday. U.S. gold futures were listless at $1,944.30.
Hurting gold’s appeal as a safe-haven asset, U.S. President Joe Biden on Sunday said he had finalized a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025 and that the deal was ready to move to Congress for a vote.
Meanwhile, data on Friday showed U.S. consumer spending increased more than expected in April and that inflation accelerated.
The report raised the chances of a 25-basis-point hike by the U.S. central bank in June to 63% and rates staying there for the rest of the year, according to the CME FedWatch tool.
“The fact that the odds of a hike were as low as 17.4% just over a week ago show how expectations for a Fed pause have been abandoned, helping the U.S. dollar rise for a third week and weigh on gold prices,” City Index senior market analyst Matt Simpson said.
Gold, which offers no yield of its own, tends to fall out of favour among investors when interest rates rise.
A firmer dollar index made bullion more expensive for overseas buyers, while Asian shares rose as the deal to suspend the U.S. government’s debt ceiling ended a protracted stalemate.
Gold is expected to break a support at $1,938 and fall into the $1,919-$1,929 range, according to Reuters technical analyst Wang Tao.
Spot silver fell 0.5% to $23.20 per ounce, platinum edged 0.1% higher to $1,023.64, and palladium rose 0.6% to $1,431.90.
Trading will likely be thin with the United States and many markets in Europe closed for a holiday on Monday.