May 30 (Reuters) – Gold bounced back from early losses on Tuesday, as the dollar pulled back and Treasury yields slid on wider market optimism about the U.S. debt ceiling deal.
Spot gold rose 0.8% to $1,958.80 per ounce by 2:30 p.m. EDT (1830 GMT), after hitting its lowest since March 17 earlier. U.S. gold futures settled 0.7% higher at $1,958.00.
The dollar eased from 10-week highs, making bullion cheaper for holders of other currencies, while benchmark 10-year Treasury yields hit a one-week low.
Along with these positive elements, “you could also see some fund managers squaring up positions at the end of the month, taking profits on their short positions and buying back”, said Jim Wyckoff, senior analyst at Kitco Metals.
“In the near term, gold prices are going to trade sideways to lower until we see a fresh catalyst.”
Returning from a long U.S. weekend, traders were also assessing Friday’s surprisethat bolstered the case for further monetary policy tightening to curb inflation.
While earlier worries on the U.S. debt deal had supported prices, repricing of the Federal Reserve’s rate hike path was keeping gold pressured, Saxo Bank’s head of commodity strategy Ole Hansen said.
Zero-yield gold tends to lose appeal in a high-interest rate environment.
Traders now see the Fed as morerates next month than leave them unchanged, with the debt deal seen easing some of the economic risks that could have kept the central bank on the sidelines.
The deal faces its, with both Democratic President Joe Biden and top congressional Republican Kevin McCarthy expecting enough votes to pass it into law.
Silver fell 0.1% to $23.17 per ounce, platinum XPT= was down 0.6% at $1,018.44 and palladium slipped 0.6% to $1,406.82.
(Reporting by Deep Vakil, Seher Dareen and Rahul Paswan in Bengaluru; editing by Susan Fenton, Jason Neely, Rashmi Aich, and Shilpi Majumdar)
This article originally appeared on reuters.com