Gold eases as traders navigate steady dollar, US debt limit hitch

By Kavya Guduru

(Reuters) – Gold prices pulled back on Monday as the dollar steadied, but drawn-out discussions around the U.S. debt ceiling and Federal Reserve Chair Jerome Powell’s less-hawkish comments prevented further losses in safe-haven bullion.

Spot gold was down 0.2% at $1,971.79 per ounce as of 0611 GMT, while U.S. gold futures fell 0.3% to $1,975.00.

The dollar index was up 0.1%, making gold less affordable for overseas buyers.

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

“Concerns over the debt ceiling remain to be a key pillar of support for gold prices… gold is taking more of a cue from debt ceiling developments (or lack of) over the Fed meeting, because a U.S. default could occur before the Fed next meet, and it would surely have an impact on the Fed’s decision,” said Matt Simpson, a senior market analyst at City Index.

Gold prices gained 1% on Friday after Fed Chair Powell said it is still unclear if U.S. interest rates will need to rise further, amid uncertainty about the impact of past hikes and recent bank credit tightening with the fact that inflation is proving hard to control.

Non-interest-bearing bullion becomes less attractive in a high-interest-rate environment.

Markets are now pricing in a 87.3% chance of the Fed standing pat on rates next month, the CME FedWatch tool showed.

Gold might break a resistance at $1,985, and climb into a $1,992-$2,003 range before turning around and falling, according to Reuters technical analyst Wang Tao.

Meanwhile, Asian stocks rose on a rally in regional chip shares on Monday.

Spot silver shed 0.9% to $23.62 per ounce, platinum lost 0.4% at $1,058.62 and palladium dipped 0.5% to $1,505.56.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shailesh Kuber, Sonia Cheema and Varun H K)