Gold rises as yields pull back with US debt debate in focus

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  • Latest FOMC meeting minutes due at 2:00 pm ET
  • Silver, platinum, palladium edge higher
  • There is still that risk of rate hike – analyst

By Arundhati Sarkar

May 24 (Reuters) – Gold edged higher on Wednesday due to a slight pullback in the dollar and Treasury yields amid 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.

Spot gold XAU= edged 0.2% higher to $1,977.69 per ounce by 0521 GMT. U.S. gold futures were up 0.3% at $1,979.80.

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.

Benchmark U.S. 10-year Treasury yields retreated, while the dollar also eased, making gold cheaper for other currency holders. USD/US/

“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 ticked 0.1% higher to $23.45 per ounce, platinum rose 0.5% to $1,052.70, and palladium gained 1% to $1,460.61.

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