U.S. debt default risks sustaining gold around $2,000 – analyst
Biden to meet lawmakers for debt-ceiling talks
India slashes base import prices of silver, raises for gold
May 16 (Reuters) – Gold prices dropped on Tuesday after U.S. central bank officials indicated they expect interest rates to stay high, while investors looked ahead to a key meeting for the outcome of debt-ceiling negotiations in Washington.
Spot gold was down 0.8% to $2,004.04 per ounce by 1215 GMT, while U.S. gold futures fell 0.7% to $2,008.50.
“There’s a strong element of exhaustion in the (gold) trade … We needed to see more signs of a pivot from the Federal Reserve and we haven’t really fully seen that yet,” said Craig Erlam, a senior market analyst at OANDA.
Several Fed policymakers on Monday signalled they see interest rates staying high, with Richmond Fed President Thomas Barkin saying he is not convinced inflation is on a steady decline back to the U.S. central bank’s 2% target.
High interest rates dull non-yielding bullion’s appeal, even though gold is considered a hedge against inflation and economic uncertainties.
Still, slightly increased risks of a U.S. debt default are leading to a bit more appeal for gold and helping sustain it around $2,000, Erlam added.
The U.S. Treasury Department said on Monday it still expects to be able to pay the U.S. government’s bills only through June 1 without a debt-limit increase.
A 3 p.m. EDT (1900 GMT) Tuesday meeting between U.S. President Biden, Speaker Kevin McCarthy, and three other top congressional leaders will be closely watched to see if a resolution is reached in the U.S. debt-ceiling standoff.
“Should $2,000 prove to be unreliable support, (gold) prices may sink toward $1,970 … a rebound from $2000 could open a path back towards $2,015 and $2,032,” according to Lukman Otunuga, senior research analyst at FXTM.
India, meanwhile, slashed the base import prices of silver, and raised the price of gold.
Spot silver slid 1.3% to $23.79 per ounce. Platinum dropped 0.7% to $1,057.71 and palladium fell 1.2% to $1,513.94.
Reporting by Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips and Sohini Goswami