Tuesday 23 May 2023 | 08:43 am
Gold prices fell heavily on Tuesday, strengthened by the dollar today, while investors monitored continuing efforts to reach an agreement to end the debt ceiling crisis in the United States.
Spot gold fell 0.4 percent to $1,962.06 an ounce by 0306 GMT. US gold futures also fell 0.6 per cent to $1,965.70.
A stronger dollar makes gold less attractive to foreign buyers.
US President Joe Biden and House Speaker Kevin McCarthy were unable to reach an agreement on Monday to raise the federal government’s $31.4 trillion debt limit, just 10 days before a possible recession that could throw the economy into chaos, but they vowed to continue the conversation. ,
precious metals prices
In other precious metals, spot silver fell 0.5 per cent to $23.55 an ounce, palladium fell 0.4 per cent to $1,485.59, while platinum settled at $1,066.59.
Although gold closed last week around $30 – its worst performance since February – Friday afternoon’s rebound kept gold’s bullish trend alive.
The gold market recovered after Federal Reserve Chairman Jerome Powell said tightening credit conditions following the banking sector turmoil may not raise interest rates as much.
It was a sign the Fed could pause in June, after Powell’s comments caused market expectations for a June rate hike to drop from about 50% to 20%, according to CME Fedwatch.
Reduced stakes for rate cut
One development that will continue to weigh on gold is diminishing hopes of an interest rate cut, said Everett Millman, precious metals expert at Gainesville Coins.
“Almost everyone in the market was convinced that the Fed was going to cut interest rates in the second half of this year. But since inflation hasn’t dropped that much, the economy is on hold, and the unemployment rate is low, those bets on the big trader cut are are undoing. Interest rates”.
Millman said that as gold tested a record high just two weeks ago, investors are also taking some profits off the table, which has accelerated the decline.
Moya noted that it was a disastrous week for gold in general, but it ended on a positive note. “People are having second thoughts about whether we are heading into a recession that will kill safe haven demand,” he said.
gold is frozen
“Wall Street thought we would see the text of a bill over the weekend or early Monday, with a possible vote in the middle of the week,” said Edward Moya, senior market analyst at OANDA. “It now looks less likely and could increase the risk that we will not get a deal before June 1.”
Moya continued, given the divisiveness in American politics, the issue of the debt ceiling will resurface.
“You’ll start to see more difficulty in talks. Gold will be in wait-and-see mode as to what part of the economy breaks down.”