Gold Poised for Largest Weekly Decline Since February Amid Optimism Over US Debt Deal

Gold Prices Inch Up as Hopes of US Debt Deal Rise, But Weekly Decline Looms

Gold prices experienced a slight increase on Friday, but they were on track for the largest weekly drop in 3-1/2 months. The optimism surrounding the US debt ceiling negotiations and diminishing expectations of an interest rate cut by year-end have reduced the appeal of bullion.

At 0418 GMT, spot gold rose 0.3% to $1,963.39 per ounce. However, it was set to record a 2.4% weekly decline, marking its biggest drop since early February. US gold futures also saw a modest increase of 0.2% to reach $1,964.60.

Market observers perceive a positive resolution to the debt-ceiling talks as recent comments have highlighted progress being made. Additionally, the simultaneous rise in yields and the dollar has led to a retreat in gold prices, according to Ilya Spivak, head of global macro at Tastylive.

US President Joe Biden and House of Representatives Speaker Kevin McCarthy are aiming to finalize a deal on the debt ceiling after Biden’s return from the Group of Seven meeting in Japan on Sunday.

While the dollar index eased slightly during the day, it remained close to a nearly two-month high, making gold relatively less affordable for international investors.

Two Federal Reserve policymakers stated that US inflation does not appear to be cooling down rapidly enough to warrant a pause in the interest rate hike campaign.

Later in the day, US Fed Chair Jerome Powell is scheduled to speak at an event, and traders will be closely monitoring his remarks for any signals regarding monetary policy.

If Powell pushes back against rate-cut expectations and hints at longer periods of higher rates than anticipated by the market, it would have a negative impact on gold once again, noted Spivak.

Meanwhile, spot silver recorded a 0.6% increase to reach $23.64 per ounce, but it was poised for a second consecutive weekly decline. Platinum saw a modest advance of 0.3% to reach $1,052.43, while palladium climbed 1.5% to $1,474.63.

ANZ noted that investors are increasing their bullish positions in platinum, and strong auto sales are also indicating positive prospects for platinum group metals (PGM).

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