Gold retreated on Wednesday as the dollar advanced after hawkish comments from U.S. Federal Reserve officials raised doubts over interest-rates cuts this year.
Spot gold dropped 0.4% to $1,981.29 per ounce by 12:10 p.m. EDT (1610 GMT) after touching its lowest since April 27. U.S. gold futures fell 0.4% to $1,984.90.
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The dollar’s jump, partly driven by Fed officials generally “leaning hawkish overall,” has been weighing on the metals markets, said Jim Wyckoff, senior analyst at Kitco Metals.
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He said a U.S. debt default could be bullish for gold, but most of the market does not seem to think that would happen.
President Joe Biden and top congressional Republican Kevin McCarthy said they would push ahead on talks to raise the debt ceiling.
The dollar index hit a seven-week high, eroding the appeal for bullion, which competes with the currency as a safe-haven.
Underscoring the Fed’s resolve to curb inflation, Chicago Fed President Austan Goolsbee had said on Tuesday it was “far too premature to be talking about rate cuts,” while Cleveland Fed President Loretta Mester said rates were not yet at a point where it could hold steady.
A Reuters poll saw the Fed holding rates steady this year. High interest rates increase the opportunity cost of holding zero-yield bullion.
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Traders, meanwhile, priced in an around 67% chance of the Fed standing pat on rates in June, with cuts still expected late in the second half of the year.
“We still look for higher prices over the next 12 months, with gold expected to reach $2,200/oz, but the next uptick in prices is likely to happen when the Fed’s tone is shifting to more dovish,” said UBS analyst Giovanni Staunovo.
Silver fell 0.2% to $23.69 per ounce, platinum rose 1.5% to $1,072.99 while palladium dropped 0.8% to $1,489.93. (Reporting by Seher Dareen in Bengaluru, additional reporting Kavya Guduru; Editing by Sharon Singleton and Arun Koyyur)
