Gold dips as Fed officials suggest higher-for-longer US rates

·2-min read
Production of gold at Krastsvetmet precious metals plant in Krasnoyarsk

By Seher Dareen

(Reuters) - Gold prices inched lower as hawkish comments from two U.S. Federal Reserve officials on Monday weighed on non-yielding bullion and markets looked for more clarity around U.S. debt ceiling negotiations.

Spot gold was down 0.1% to $1,974.90 per ounce by 2:13 p.m. ET (1813 GMT). U.S. gold futures settled 0.2% lower at $1,977.10.

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

While worries over a deal on the debt ceiling not being implemented before June 1 could cause some flight-to-safety buying into gold, the marketplace seems to believe that a financial crisis can be averted, said Jim Wyckoff, senior analyst at Kitco Metals.

Bullion traders were also watching the dollar closely, which was a major element in the lack of buying interest in the gold market recently, Wyckoff said. [USD/]

Markets await the minutes of the latest U.S. Federal Open Market Committee meeting due on Wednesday. Markets are pricing in a 68.6% chance of rates being held steady next month, yet a 31.4% chance of a 25-basis-point hike, the CME FedWatch tool showed.

Minneapolis Fed President Neel Kashkari told CNBC that "it may be that we have to go north of 6%" to get inflation back to the Fed's 2% target, while St. Louis Fed President James Bullard said there might be the need to go higher on the policy rate.

Gold tends to lose appeal in a high interest rate environment.

"$1,960 remains a key zone of support, a significant break of which could signal a much deeper correction is on the cards," Craig Erlam, a senior market analyst at OANDA, wrote in a note.

Spot silver fell 0.6% to $23.67 per ounce, platinum was up 0.6% to $1,068.88 while palladium dipped 1.6% to $1,488.87.

(Reporting by Seher Dareen in Bengaluru; Editing by Ed Osmond, Shilpi Majumdar and Cynthia Osterman)