Gold fell to its lowest level in two months on Thursday as optimism over the U.S. debt ceiling dampened demand for a safe-haven asset, while strong economic data fueled bets on another Fed hike.
Spot gold fell 0.8% to $1,941.85 an ounce at 1847 GMT, having previously traded on March 22. Meanwhile, U.S. gold futures closed up 1.1% at 1,943.70.
* US President Joe Biden and Republican Congressman Kevin McCarthy appeared closer to a deal on Thursday to cut spending and lift the $31.4 trillion public debt ceiling they left a short time ago, to avoid the risk of a deficit.
* “If the deal is reached at the weekend, it will take the biggest risk off the table,” said Edward Moya, senior market analyst at OANDA.
* Gold extended losses after official data showed new US jobless claims rose moderately last week, indicating continued strength in the labor market, and estimates of US GDP growth were revised upwards.
* “A more impressive round of economic data suggests that this economy is showing such resilience (…) that the possible case of a further rate hike is strengthening,” Moya added.
* According to CME’s FedWatch tool, markets are now on a 25-basis-point hike in June to 50-50, with a cut not before September. Gold, no matter what, tends to lose its appeal in the high end.
* The dollar hit its highest since mid-March, making the gold metal less attractive to overseas buyers, while yields on the benchmark Treasury note hit their March 13 highs.
* In other metals, spot silver rose 1.4% to a two-month low of $22.75 an ounce; platinum down 0.2% to 1,021.68; and palladium was up 0.1% at $1,416.39.