Gold prices remained relatively unchanged in early trading on Monday as investors awaited further discussions among U.S. lawmakers regarding the debt ceiling, while keeping a close eye on monetary policy following mixed signals from the Federal Reserve.
President Joe Biden and House Speaker Kevin McCarthy are scheduled to continue negotiations later in the day to avoid a potential U.S. default. Last week’s talks failed to produce an agreement, and with a mid-June deadline approaching, market uncertainty prevails.
Despite the prevailing concerns, gold witnessed limited demand as a safe haven asset over the past week, leading to a sharp decline below the $2,000 threshold. The drop was largely attributed to a series of hawkish remarks from Federal Reserve officials, signaling the possibility of more interest rate hikes by the central bank.
However, Federal Reserve Chair Jerome Powell’s moderately dovish statements provided some offset. Powell acknowledged that the tightening of U.S. credit conditions this year might diminish the need for substantial rate increases. His comments triggered a recovery in gold prices on Friday, though the precious metal still closed the week nearly 2% lower.
In early trading on Monday, spot gold steadied around $1,977.80 per ounce, while gold futures maintained a price of $1,980.50 per ounce at 21:44 ET (01:44 GMT). The yellow metal is anticipated to trade within a narrow range in the coming days until more clarity emerges regarding the debt ceiling and monetary policy.
Additional speeches from Federal Reserve members are scheduled for later on Monday, and the minutes of the Fed’s May meeting are expected to be released later this week. Furthermore, manufacturing activity data for May will provide insights into the world’s largest economy, which is experiencing a slowdown due to rising interest rates and high inflation.
As U.S. economic conditions deteriorate, gold is projected to benefit from increased demand as a safe haven asset later this year. Market participants are also positioning themselves for a potential pause in the Federal Reserve’s rate hike cycle by June, which could further support the price of gold.
Other precious metals experienced a stabilization on Monday after declining in the past week. Platinum futures registered a modest 0.1% rise, while silver futures saw a marginal decline of 0.2%.
Within the realm of industrial metals, copper futures dropped 0.7% to $3.7060 per pound, hovering near a six-month low following significant losses over the past three weeks.
The red metal was negatively impacted by signs of a sluggish economic rebound in China, as investors prepared for a weaker-than-expected recovery in demand this year. China, being the world’s largest copper importer, significantly influenced market sentiment towards the metal.
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