Gold edges higher as traders eye US debt ceiling, Fed minutes

Gold

Gold edged up on Wednesday as the looming debt ceiling deadline prompted some safe-haven flows, while traders waited to scrutinise minutes of the Federal Reserve's recent policy meeting for guidance on U.S. interest rates.

Spot gold was up 0.3% to $1,981.46 per ounce by 1215 GMT, while U.S. gold futures gained 0.5% to $1,984.30.

Representatives of U.S. President Joe Biden and congressional Republicans ended another round of talks to raise the debt-ceiling without a resolution on Tuesday.

While a strengthening dollar is weighing on gold prices, some safe haven buying is keeping the metal close to $2,000/oz, said Edward Gardner, commodities economist at Capital Economics.

Stocks lurched lower due to the stand-off in the debt ceiling talks, helping safe-haven assets like gold recoup some of their recent losses. [MKTS/GLOB][USD/]

If regional U.S. banking troubles were to subside and agreement reached over the debt ceiling, gold could fall further, Gardner added, perhaps even lower than Capital Economics' end-of-year $1,950 forecast.

Bullion was hovering just above 1-1/2 month lows touched last week as several Fed officials suggested the central bank would stick to its rate-hiking plan. Higher interest rates tend to increase the opportunity cost of holding non-interest-bearing gold.

"For now, gold is a holding pattern, unlikely to fall much lower given the lack of progress on U.S. debt talks but equally needing a fresh catalyst…to push prices back above the $2,000 an ounce threshold," Kinesis Money analyst Rupert Rowling wrote in a note.

Minutes of the Fed's May 2-3 meeting are due at 1800 GMT, after the central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range.

Spot silver rose 0.2% to $23.48 per ounce. Platinum fell 0.9% to $1,038.95 while palladium dipped nearly 1% to $1,431.50, both near three-week lows.