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  • When the dollar rises for two months, gold slides longer
  • Biden, McCarthy Close to Debt Ceiling Deal – Sources
  • Silver, palladium in less than two months

May 25 (Reuters) – Gold fell to its lowest level in two months as optimism surrounding U.S. debt ceiling talks led to another rate hike by the Federal Reserve.

Spot gold was down 0.6% at $1,945.09 an ounce at 11:56 a.m. EDT (1556 GMT), the lowest since March 22. U.S. gold futures fell nearly 1% to $1,945.40.

US President Joe Biden and top Republican lawmaker Kevin McCarthy have reached an agreement on the US debt ceiling, according to a person familiar with the discussions.

“It’s a one-two punch for gold … if a deal is done at the end of the week, that will take the biggest risk off the table,” said Edward Moya, senior market analyst at OANDA.

Gold extended its losses last week after official data showed a slight increase in new US jobless claims, indicating continued strength in the labor market and revised down estimates for last quarter’s GDP growth.

“The overwhelming economic data suggests that this economy is still showing a lot of resilience… The argument for another rate hike is growing here,” Moya added.

Traders looked at the Fed’s preferred measure of inflation, the core personal consumption expenditures (PCE) index, late on Friday.

According to CME’s FedWatch tool, there is a 48% chance of a 25-basis-point hike in June after markets eased not long before September.

Gold, an intangible asset, tends to lose its appeal in a high-interest environment.

The dollar moved to its highest level since mid-March, making gold attractive to foreign buyers, while the benchmark Treasury yield hit its highest level since March 13.

“Gold was looking at things through the lens of the dollar,” said independent analyst Ross Norman.

Spot silver fell 1.1% to $22.83 an ounce, while palladium also fell 1.1% to $1,431.20, both at two-month lows.

Platinum was largely unchanged at $1,023.37.

Reporting by Deep Vakil and Seher Dareen in Bengaluru; Editing by Varrun HK, Kirsten Donovan, Shinjini Ganguli and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

Deep Kaushik Vakil

Thomson Reuters

Reports on global commodities and energy markets with a special focus on the oil and gas infrastructure and energy sectors. Along with agriculture, metals and dry bulk, coverage includes US energy regulations, extreme weather events and the transition to renewables. Address: 917483271897

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