By Deep Kaushik Vakil
(Reuters) – Gold prices steadied on Tuesday as talks over increasing the U.S. debt limit stretched to another round, recovering from session lows as the dollar and Treasury yields backed-off from earlier highs.
Spot gold was mostly unchanged at $1,968.79 per ounce by 14:35 GMT after shedding as much as 0.8% earlier.
U.S. gold futures were down 0.3% to $1,970.70.
Gold rose from session lows on reports of further negotiations over raising the debt ceiling, said Daniel Pavilonis, senior market strategist at RJO Futures.
Republicans in the U.S. House of Representative said they were making little progress in talks with the White House over raising the debt ceiling, with the nation facing the risk of default in as soon as nine days.
Wall Street’s main indexes opened lower, while dollar index and benchmark Treasury yields backed off their session highs. [USD/] [US/]
Bullion has lost more than $100 an ounce from its near-record peak hit earlier this month, mainly pressured by growing bets on interest rates staying higher for longer.
“For now the market has not entirely ruled out another rate hike, and that’s clearly not what (it) was looking (like) just a month ago and that’s leading to this realignment of prices,” Ole Hansen, head of commodity strategy at Saxo Bank.
Minneapolis Fed President Neel Kashkari said on Tuesday that U.S. rates may have to go “north of 6%” while St. Louis Fed President James Bullard said the bank may still need to raise rates by another half-point this year.
Gold tends to fall out of favour amongst investors when rates rise and push up bond yields, as the opportunity cost of holding zero-yield rises.
Investors now await the minutes from the Federal Open Market Committee’s May 2-3 meeting on Wednesday.
Silver fell 0.7% to $23.51 per ounce, platinum was down 0.9% to $1,057.37 while palladium lost 1.7% to $1,465.01.
(Reporting by Deep Vakil and Seher Dareen in Bengaluru; editing by Susan Fenton, Jason Neely and Vinay Dwivedi)
