Gold Prices Slide as Dollar Strengthens and Debt Default Risks Loom

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Last Updated: May 24, 2023, 23:43 IST

FILE PHOTO: A saleswoman shows gold bangles to a customer at a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kolkata, India, May 3, 2022. (Image: Reuters)

Spot gold was down 0.8% at $1,959.29 per ounce by 12:22 p.m. ET (1622 GMT) on Wednesday after rising as much as 0.5% earlier

Gold slipped as the dollar firmed, cutting some safe-haven flows into bullion from the looming risk of a U.S. debt default as talks entered a critical stretch, while investors awaited minutes of the Federal Reserve’s recent policy meeting.

Spot gold was down 0.8% at $1,959.29 per ounce by 12:22 p.m. ET (1622 GMT) on Wednesday after rising as much as 0.5% earlier. U.S. gold futures fell 0.7% to $1,961.40.

The dollar index hit a fresh two-month high, weighing on demand for greenback-priced bullion. [USD/]

U.S. Treasury Secretary Janet Yellen maintained early June as a debt ceiling default deadline, while negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy reconvened to try to close a deal.

“Overwhelmingly, the debt ceiling headlines are at play … but there’s some signal in the noise,” said Daniel Ghali, commodity strategist at TD Securities.

Gold gained in the previous session “despite headwinds from a rising broad dollar, which reveals notable demand behind the scenes,” Ghali added.

Wall Street’s main indexes slipped as the debt ceiling impasse kept investors on edge. [.N]

If regional U.S. banking troubles were to subside and agreement reached over the debt ceiling, gold could fall further, said Edward Gardner, commodities economist at Capital Economics.

Fed governor Christopher Waller said while skipping an interest rate hike at the U.S. central bank’s meeting next month may be possible, an end to the hiking campaign isn’t likely.

Bullion was hovering just above 1-1/2 month lows touched last week as higher interest rates tend to increase the opportunity cost of holding non-interest-bearing gold.

Minutes of the Fed’s May 2-3 meeting are due at 2 p.m. ET, after the central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range.

Spot silver shed 1.6% to $23.06 per ounce, while platinum fell 2.6% to $1,020.80. Palladium dropped 3.2% to a near two-month low of $1,400.15.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)