Gold gains on dollar pullback, debt-ceiling talks in focus

May 15 (Reuters) – Gold advanced on Monday on a weaker dollar as traders stuck to bets on interest rate cuts before year-end despite comments from Federal Reserve officials, with a focus also on the US debt ceiling talks.

Spot gold was up 0.4% at USD 2,019.37 per ounce by 1:40 p.m. EDT (1740 GMT), rebounding from its one-week low touched on Friday.

US gold futures settled up 0.1% at USD 2,022.70.

The dollar eased from a five-week high, making bullion cheaper for overseas buyers.

“Investors will continue to deploy their capital in gold as the prospect of a rate-cutting cycle continues to firm over the next 12 months,” said Daniel Ghali, commodity strategist at TD Securities.

Most market participants were still betting on at least one rate cut before 2023 ends, according to the CME’s FedWatch tool. Higher interest rates dim appeal for zero-yield gold.

Minneapolis Fed President Neel Kashkari said there was more work to be done to rein in inflation, while Atlanta Fed president Raphael Bostic played down chances of rate cuts this year.

Any hawkish comments are “essentially disregarded” because the market is inferring what the Fed might end up doing based on incoming data as opposed to what they are saying, Ghali added.

The focus will be on more Fed speakers this week, including Chair Jerome Powell.

President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy, meanwhile, entered a critical week for debt-ceiling talks to avert a devastating default.

While gold remains supported by factors including rate cut bets, a “major risk-on wave stemming from a deal could drag gold into the sub-USD 2,000 domain”, said Han Tan, chief market analyst at Exinity.

Silver rose 0.8% to USD 24.11 per ounce, platinum gained 1.6% to USD 1,066.27, and palladium climbed 1.4% to USD 1,530.34.

Rising demand from automakers, industry, and investors will push the global platinum market into its biggest deficit in years, three industry reports predicted.

(Reporting by Deep Vakil and Arundhati Sarkar in Bengaluru; Editing by Shilpi Majumdar)