Gold Falls On Dollar Strength As U.S. Debt Talks Stall

(CTN News) – In the wake of the dollar’s strengthening Wednesday, gold prices fell as investors took advantage of the looming risk of a U.S. debt default to move into a safe-haven position while investors awaited the minutes of the Federal Reserve’s recent policy meeting.

The spot price of gold was trading at $1,961.59 an ounce by 12:03 p.m. Eastern Time (ET) after rising by as much as 0.5% earlier in the day. Gold futures in the U.S.

There was a spike in the dollar index to a new two-month high, which put a damper on the demand for bullion priced in dollars.

It was announced on Wednesday morning that Democratic President Joe Biden and Senate Majority Leader Kevin McCarthy would reconvene on Wednesday morning in order to reach an agreement on raising the debt ceiling and avoiding a catastrophic default.

It is clear that the headlines surrounding the debt ceiling are playing a major role in this debate… Daniel Ghali, senior commodity strategist at TD Securities, believes there is a little bit of signal in the noise,” he said.

As a result of the rising broad dollar, gold rose in the previous session “despite headwinds from the rising broad dollar, which indicates that significant demand is emerging behind the scenes.”

Investors remained tense as Wall Street’s main indexes opened lower due to the debt ceiling impasse that has kept them on edge.

Edward Gardner, commodities economist at Capital Economics, believes that gold could fall even further in the event that regional U.S. banking concerns subside and an agreement can be reached over the debt ceiling.

There were several Fed officials suggesting that the central bank will stick to its rate-hike plan as the gold price hovered just above 1-1/2-month lows touched last week.

There is a tendency for higher interest rates to lead to a higher opportunity cost for holding gold which is not interest-bearing.

A press release announcing the minutes of the Federal Reserve’s May 2-3 meeting is due at 2 p.m. Eastern Time on Monday, following the central bank’s decision to raise its benchmark overnight interest rate by a quarter point to a range between 5% and 5.25%.

The spot price of silver fell 1.2% to $23.1371 per ounce, while platinum fell 2.1% to $1,025.74 per ounce. A near two-month low of $1,397.8864 was reached by palladium, which fell 3.3% to a near two-month low.

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