May 31 (Reuters) – Gold prices slipped on Wednesday to head for their first monthly decline in three as the U.S. dollar climbed on expectations the Federal Reserve would keep interest rates higher for longer than previousy thought.
Spot gold fell 0.1% to $1,957.99 per ounce by 0947 GMT. It has lost 1.5% so far this month and $120 from its near-record highs earlier in May.
U.S. gold futures held steady at $1,976.90.
“The strong U.S. dollar is likely to remain a headwind for gold prices. With the banking crisis on the back burner and the debt ceiling debacle all but resolved, the focus turns back to the inflation fight,” Ilya Spivak, head of global macro at Tastylive, said.
Global shares fell ahead of a vote in Washington on the U.S. debt ceiling, while the U.S. dollar hit a more than two-month high after data showed China’s recovery is stalling.
“Gold will probably remain at its current level over the next few days as safe haven demand related to uncertainty about the debt ceiling persists,” said Edward Gardner, commodities economist at Capital Economics.
In the near term, gold faces headwinds from a stronger dollar and expectations the Fed’s interest rates will keep rising, Gardner added.
Fed Bank of Cleveland President Loretta Mester sees no compelling reason to wait to implement another interest rate hike, Financial Times reported on Wednesday.
Fed funds futures expect a 66.3% chance of a 25 bps hike in the central bank’s June 13-14 meeting, with rate cuts being priced out for the second half of the year.
Interest rate hikes remain a headwind for gold since that translates into higher opportunity cost of holding non-yielding bullion.
Elsewhere, spot silver rose 0.2% to $23.26 per ounce, platinum was up 0.3% to $1,016.92 while palladium was down 0.7% to $1,390.45. All three were set for a monthly drop.
Reporting by Seher Dareen and Arundhati Sarkar in Bengaluru; editing by Barbara Lewis
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