Gold prices steady as US debt ceiling impasse drags on

GOLD prices were steady in early Asian trade on Tuesday (May 23) as investors focused on the long-drawn US debt ceiling talks after President Joe Biden and the top congressional Republican struggled to make a deal.

Spot gold edged 0.1 per cent higher at US$1,971.09 per ounce by 0019 GMT. US gold futures fell 0.3 per cent to US$1,972.10.

Biden and House Speaker Kevin McCarthy could not reach an agreement on Monday on how to raise the US government’s US$31.4 trillion debt ceiling with just 10 days before a possible default that could sink the US economy, but pledged to keep talking.

The White House lacks urgency on dealing with the US debt ceiling crisis, US Representative Patrick McHenry, a top Republican negotiator, said on Monday night.

St Louis Fed president James Bullard said there might be the need to go higher on the policy rate.

Federal Reserve Bank of Minneapolis president Neel Kashkari cautioned that while it may appear like the worst of the banking sector’s stresses are over, history showed more trouble can’t be ruled out.

Meanwhile, Wall Street banks and asset managers have been preparing for the fallout from a potential default.

While gold is considered a hedge against economic uncertainties, rising rates hurt demand for the zero-yielding asset.

Markets are now pricing in a 74.3 per cent chance of the Fed standing pat on rates next month, the CME FedWatch tool showed.

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Spot silver fell 0.1 per cent to US$23.64 per ounce, platinum shed 0.3 per cent to US$1,063.97, and palladium lost 0.3 per cent to US$1,487.07. REUTERS