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Gold dips as Fed officials suggest higher-for-longer US rates

May 22, 2023By Reuters

May 22 (Reuters) – Gold prices inched lower as hawkish comments from two US Federal Reserve officials on Monday weighed on non-yielding bullion and markets looked for more clarity around US debt ceiling negotiations.

Spot gold was down 0.1% to USD 1,974.90 per ounce by 2:13 p.m. ET (1813 GMT). US gold futures settled 0.2% lower at USD 1,977.10.

President Joe Biden and House Republican Speaker Kevin McCarthy will discuss the debt ceiling on Monday, which will be closely watched to see if a resolution is reached after negotiations broke off on Friday.

While worries over a deal on the debt ceiling not being implemented before June 1 could cause some flight-to-safety buying into gold, the marketplace seems to believe that a financial crisis can be averted, said Jim Wyckoff, senior analyst at Kitco Metals.

Bullion traders were also watching the dollar closely, which was a major element in the lack of buying interest in the gold market recently, Wyckoff said.

Markets await the minutes of the latest US Federal Open Market Committee meeting due on Wednesday. Markets are pricing in a 68.6% chance of rates being held steady next month, yet a 31.4% chance of a 25-basis-point hike, the CME FedWatch tool showed.

Minneapolis Fed President Neel Kashkari told CNBC that “it may be that we have to go north of 6%” to get inflation back to the Fed’s 2% target, while St. Louis Fed President James Bullard said there might be the need to go higher on the policy rate.

Gold tends to lose appeal in a high interest rate environment.

“USD 1,960 remains a key zone of support, a significant break of which could signal a much deeper correction is on the cards,” Craig Erlam, a senior market analyst at OANDA, wrote in a note.

Spot silver fell 0.6% to USD 23.67 per ounce, platinum was up 0.6% to USD 1,068.88 while palladium dipped 1.6% to USD 1,488.87.

(Reporting by Seher Dareen in Bengaluru; Editing by Ed Osmond, Shilpi Majumdar and Cynthia Osterman)


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