May 17 (Reuters) – Gold retreated on Wednesday as the dollar advanced after hawkish comments from US Federal Reserve officials raised doubts over interest-rate cuts this year.
Spot gold dropped 0.4% to USD 1,981.39 per ounce by 2:15 p.m. EDT (1815 GMT) after touching its lowest since April 27. US gold futures settled down 0.4% at USD 1,984.90.
The dollar’s jump, partly driven by Fed officials generally “leaning hawkish overall,” has been weighing on the metals markets, said Jim Wyckoff, senior analyst at Kitco Metals.
He said a US debt default could be bullish for gold, but most of the market does not seem to agree.
US President Joe Biden and top congressional Republican Kevin McCarthy underscored their determination to reach a deal soon to raise the debt ceiling.
The dollar index hit a seven-week high, eroding the appeal for bullion, a rival safe haven. USD/
Underscoring the Fed’s resolve to curb inflation, Chicago Fed President Austan Goolsbee had said on Tuesday it was “far too premature to be talking about rate cuts,” while Cleveland Fed President Loretta Mester said rates were not yet at a point where it could hold steady.
Economists polled by Reuters saw the Fed holding rates steady this year. High interest rates increase the opportunity cost of holding zero-yield bullion.
Traders priced in a roughly 67% chance of the Fed standing pat on rates in June, with cuts still expected late in the second half of the year.
“We still look for higher prices over the next 12 months, with gold expected to reach USD 2,200/oz, but the next uptick in prices is likely to happen when the Fed’s tone is shifting to more dovish,” said UBS analyst Giovanni Staunovo.
Silver was mostly flat at USD 23.74 per ounce, platinum rose 1.1% to USD 1,068.74 while palladium dropped 0.9% to USD 1,488.23.
(Reporting by Seher Dareen in Bengaluru, additional reporting by Kavya Guduru; Editing by Sharon Singleton, Arun Koyyur, and Richard Chang)