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Gold languishes near 2-month low amid US debt deal optimism

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Gold prices were little changed in early Asian trade on Tuesday, lingering near a two-month low, as optimism over a US debt ceiling deal along with a firm dollar dented the metal’s appeal.

FUNDAMENTALS

* Spot gold was flat at $1,942.16 per ounce by 0020 GMT, not far from a two-month low hit on Friday. US gold futures fell 0.1% to $1,941.80.

* The dollar index held firm, making bullion less attractive for holders of other currencies.

* US President Joe Biden said on Monday he feels good about prospects for passage by Congress of the debt ceiling deal that he reached with House of Representatives Speaker Kevin McCarthy.

* However, a handful of hard-right Republican lawmakers said they would oppose a deal to raise the $31.4 trillion debt ceiling. Focus now turns to passage of the deal through Congress before June 5.

* Having navigated the financial crisis of 2008, the president of the Federal Reserve bank of Minneapolis, Neel Kashkari, worries about systemic risks. But now, as a US monetary policymaker, he worries even more about inflation.

* Fed officials have in recent days turned up the heat with a hawkish outlook on interest rates, and that has to some extent offset safe-haven flows around the US debt ceiling situation as higher interest rates dull the appeal for zero-yield bullion.

* Markets are now pricing in a 39.2% chance of the Fed keeping rates on hold in June.

* Spot silver fell 0.2% to $23.15 per ounce, while platinum rose 0.2% to $1,027.02, and palladium advanced 1.2% to $1,431.71.

* In the physical market, net imports into the world’s top gold consumer, China, rose to 49,906 tons in April, the highest since February, and compares with 47,527 tons in March.

DATA/EVENTS (GMT) 0900 EU Consumer Confid. Final May 1400 US Consumer Confidence May

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