Gold trades in tight range with US debt debate, Fed clues in focus

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Gold prices moved in a narrow range on Wednesday as traders assessed the U.S. debt ceiling deadlock, while minutes from the Federal Reserve’s last policy meeting were also in focus for guidance on future interest rates.

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Spot gold was little changed at $1,972.49 per ounce by 0707 GMT, trading in a $9 range. U.S. gold futures were steady at $1,973.70.

Representatives of U.S. President Joe Biden and congressional Republicans ended another round of debt-ceiling talks without a resolution on Tuesday as the deadline to raise the government’s $31.4 trillion borrowing limit ticked closer.

“Focus ahead remains on the debt-ceiling impasse and Fed’s rate-hike cycle,” OCBC FX strategist Christopher Wong said.

“Fed remarks have been noisy and varied, but what is probably clear is that the Fed is saying that a pause is not an end to the tightening cycle, so there is still that risk of hike, dependent on how data pans out.”

Interest rate hikes raise the opportunity cost of holding non-interest-bearing gold.

Minutes of the Fed’s May 2-3 meeting, where the U.S. central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range, are due later in the day.

Markets are currently pricing in a 71.5% chance of the Fed holding rates at its June 13-14 policy meeting, the CME FedWatch tool showed.

If the market concludes that rate hikes could resume or rates may be held at the peak without cuts through the rest of the year if all goes well, that would hurt gold, said Ilya Spivak, head of global macro at Tastylive.

Spot silver fell 0.4% to $23.34 per ounce, platinum shed 0.4% to $1,043.95, and palladium dropped 0.4% to $1,440.10. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu and Christopher Cushing)