The attraction of gold as a haven asset increased due to protracted deliberations about the United States debt ceiling and remarks made by Federal Reserve Chairman Jerome Powell.
Spot gold was up 0.1% at USD 1,978.06 per ounce, while US gold futures were down 0.1% at USD 1,979.40.
According to Matt Simpson, a senior market analyst at City Index, “Concerns over the debt ceiling remain a crucial pillar of support for gold prices, with USD 2,000 providing a springboard for dip buyers on May 19 as talks rolled over for another week.”
It will be widely monitored to see if a resolution is achieved in the deadlock on the row over the debt ceiling of the world’s largest economy.
Gold prices increased 1% on May 19 after Fed Chair Powell said it is still unsure whether US interest rates would need to climb further, amid uncertainty about the effects of previous hikes and the recent tightening of bank credit because inflation is proving difficult to control.
After CNN reported that Treasury Secretary Janet Yellen had advised bank CEOs that additional mergers might be required in light of a string of bank failures, shares of US regional lenders declined.
In an economy with high-interest rates, bullion that doesn’t pay interest tends to lose some appeal.
According to the CME FedWatch tool, markets are currently pricing in an 86.2% chance of the Fed keeping interest rates unchanged in June 2023.
But according to Simpson of City Index, “Gold is taking more of a cue from debt ceiling developments (or lack thereof) over the Fed meeting because a US default might happen before the Fed next meets, and it would undoubtedly impact the Fed’s decision.”
Gold is now more affordable for foreign buyers as the dollar index fell by 0.2%.
Silver prices on the spot market decreased by 0.2% to USD 23.77 per ounce, platinum fell by 0.1% to USD 1,061.68, and palladium dropped by 0.3% to USD 1,508.54.