Gold dips as markets assess rate-hike remarks, debt-ceiling debate

GOLD prices eased in early Asian trade on Tuesday (May 16) as traders assessed comments from US central bank officials on interest rates staying high, while the market focus was also on developments in the debt-ceiling debate.

Spot gold was down 0.3 per cent at US$2,014.62 per ounce by 0029 GMT, while US gold futures eased 0.2 per cent to US$2,018.90.

US central bankers on Monday signalled they see interest rates staying high and, if anything, going higher, given inflation that may be slow to improve and an economy showing only tentative signs of weakness.

Atlanta Fed president Raphael Bostic, however, said he was “inclined” to hold interest rates steady at the next meeting.

While gold is considered a hedge against inflation, rising interest rates dull non-yielding bullion’s appeal.

Markets are currently pricing in a 75.3 per cent chance of the US central bank holding rates at the current level in June, according to the CME FedWatch tool.

The US Treasury Department reiterated on Monday it expects to be able to pay the US government’s bills only through Jun 1 without a debt limit increase, increasing pressure on congressional Republicans and the White House to reach a deal in the coming days.

President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy prepared for critical debt-ceiling talks, with a little more than two weeks to go before the US government could run short of money to pay its bills.

The New York Federal Reserve said on Monday its barometer of manufacturing activity in New York State plunged in May, but the survey is extremely volatile, making it harder to interpret.

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Spot silver fell 0.3 per cent to US$24.05 per ounce, platinum edged 0.1 per cent lower to US$1,063.68 and palladium shed 0.3 per cent to US$1,528.20. REUTERS