Gold held below $1,950 an ounce on Monday, remaining close to its lowest level in two months, weighed down by hawkish US Federal Reserve bets and news that a tentative US debt ceiling deal was reached over the weekend. President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle over the weekend to suspend the $31.4 trillion debt limit and expressed confidence that both Democrats and Republicans will support the deal.
Meanwhile, stronger-than-expected US economic data bolstered expectations of further interest rate hikes from the Fed. Markets are now pricing in a higher chance that the Fed will deliver another 25 basis point rate hike in June, a shift from previous expectations for a pause in the tightening cycle. Gold is highly sensitive to the rates outlook as higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal.
