Gold Slides to Two-Month Low as Debt Talks, Economic Data Fuel Rate Hike Bets

Gold slid to its lowest in two months on Thursday as optimism around the U.S. debt ceiling talks lowered safe-haven demand for bullion and robust economic data fueled bets of another rate hike by the Federal Reserve.

Spot gold was down 0.6% at $1,945.09 per ounce by 11:56 a.m. EDT (1556 GMT), having hit its lowest since March 22. U.S. gold futures eased nearly 1% to $1,945.40.

U.S. President Joe Biden and top Republican lawmaker Kevin McCarthy are edging close to a deal on the U.S. debt ceiling, according to a person familiar with the talks.

“It’s a one-two punch for gold … if a deal is done over the weekend, then that will remove the biggest risk off the table,” said Edward Moya, senior market analyst at OANDA.

Gold extended losses after official data showed new U.S. jobless claims rose moderately last week, indicating persistent labor market strength, and revised up the estimated GDP growth last quarter.

“A rather impressive round of economic data suggests this economy is still showing so much resilience … the argument for possibly delivering another rate hike is gaining steam here,” Moya added.

Traders looked to the Fed-favored inflation gauge, core personal consumption expenditures (PCE) index, due Friday.

Markets now priced in a 48% chance of a 25-basis-point hike in June, seeing cuts no sooner than September, according to the CME FedWatch tool.

Gold, a non-yielding asset, tends to lose appeal in a high-interest rate environment.

The dollar climbed to its highest since mid-March, making gold less attractive for overseas buyers, while benchmark Treasury yields were near highs seen on March 13. [USD/][US/]

Gold was “really viewing things through the lens of the dollar,” said independent analyst Ross Norman.

Spot silver eased 1.1% to $22.83 per ounce, while palladium also dipped 1.1% to $1,431.20, both at two-month lows.

Platinum was mostly unchanged at $1,023.37.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)