Gold faces third weekly drop on dollar strength, US debt deal hopes

GOLD prices languished near a two-month low on Friday (May 26) and were set for their third straight weekly fall, as progress in US deal ceiling negotiations bolstered the dollar.

Spot gold was flat at US$1,939.18 per ounce by 0032 GMT after hitting its lowest since Mar 22 in the previous session. US gold futures were down 0.2 per cent at US$1,939.60.

Bullion has declined 1.9 per cent so far in the week in what could be its biggest since early February.

The dollar held close to its highest since Mar 17, making gold less attractive for overseas buyers, while benchmark Treasury yields were also near highs seen in March.

US President Joe Biden and top congressional Republican Kevin McCarthy on Thursday appeared to be nearing a deal to cut spending and raise the government’s US$31.4 trillion debt ceiling, with little time to spare to head off the risk of default.

Adding pressure on gold, official data showed new US jobless claims rose moderately last week, indicating persistent labour market strength.

On the interest rate front, markets are now pricing in a 51.7 per cent chance of a 25-basis-point hike in June and seeing cuts no sooner than September, according to the CME FedWatch tool.

Boston Federal Reserve president Susan Collins said on Thursday the time may be at hand for the US central bank to push the pause button on its rate-hiking campaign to see how the impact of past tightening is weighing on activity.

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

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Spot silver fell 0.4 per cent to US$22.68 per ounce, platinum edged 0.1 per cent lower to US$1,019.11, and palladium shed 0.4 per cent to US$1,411.12. REUTERS