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Gold faces monthly fall on debt deal hopes, Fed policy outlook

Wednesday,   31-May-2023   08:21 AM (IST)

Gold prices on Wednesday headed for their first monthly fall in three, as expectations that the Federal Reserve will likely raise interest rates further and optimism over the U.S. debt deal diminished bullion’s status as a safe haven. Spot gold was flat at $1,958.02 per ounce by 0026 GMT, but down 1.6% for the month so far. U.S. gold futures held steady at $1,957.80. Top congressional Republican Kevin McCarthy on Tuesday urged members of his party to support a bipartisan deal to lift the $31.4 trillion U.S. debt ceiling, and a key party hardliner said he would likely support the measure in a critical procedural vote. Fed funds futures traders now see the Fed as more likely to hike interest rates next month than leave them unchanged, as economic data beats expectations and lawmakers appear to have reached a deal to raise the debt ceiling. The market is now pricing for a 66.6% chance of a 25-basis-point increase at the Fed’s June 13-14 meeting. Higher interest rates dull the appeal for zero-yield bullion. Meanwhile, Richmond Federal Reserve president Tom Barkin said that once the current inflation shock is past the U.S. economy might support interest rates at a “neutral, normal level”, rather than being driven back to near zero in every slowdown. Asian market focus on Wednesday turns to Chinese purchasing managers index figures, which will give the first insight into factory and service sector activity in May in the world’s second largest economy and the top gold consumer.  Spot silver was little changed at $23.2019 per ounce, platinum rose 0.7% to $1,021.08, and palladium climbed 0.8% to $1,412.15 on the day, but were all set for monthly decline.