By Kavya Guduru
(Reuters) – Gold prices eased on Wednesday as the dollar gained after the latest comments from U.S. Federal Reserve officials pushed back against prospects of interest rate cuts this year.
Spot gold was down 0.1% at $1,986.64 per ounce at 0854 GMT, close to a two-week low hit on Tuesday. U.S. gold futures fell 0.1% to $1,991.50.
The dollar index hit a six-week high. Gold competes with the dollar as a safe store of value, and gains in the currency make bullion less attractive for overseas buyers. [USD/]
“It seems some market participants still anticipate another rate hike by the U.S. Fed”, pressuring gold, said UBS analyst Giovanni Staunovo.
On Tuesday, Chicago Fed President Austan Goolsbee said it was premature to be discussing rate cuts, while Atlanta Fed president Raphael Bostic said the Fed would need to stay “super strong” in fighting inflation even if the unemployment rate starts to rise later in the year.
High interest rates increase the opportunity cost of holding non interest-bearing bullion.
Gold might break support at $1,985 and fall towards $1,975, according to Reuters technical analyst Wang Tao.
Traders are pricing in a 78.6% chance of the Fed standing pat on rates in June, according to the CME FedWatch tool.
“We still look for higher prices over the next 12 months, with gold expected to reach $2,200/oz, but the next uptick in prices is likely to happen when the Fed’s tone is shifting to more dovish,” Staunovo added.
However, lingering fears of a U.S. debt default and its economic fallout kept a floor under gold prices.
U.S. President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming default.
Silver dipped 0.4% to $23.63 per ounce. Platinum rose 0.8% to $1,065.06, while palladium shed 1.2% to $1,483.57.
(Reporting by Kavya Guduru in Bengaluru; Editing by Mark Potter)
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