Gold dips as US debt ceiling deal hopes support dollar

Gold prices fell on Tuesday pressured by a stronger dollar, as investors focused on U.S. debt ceiling talks, with this week's Federal Reserve policy minutes and economic data also on the radar.

Spot gold GOLD fell 0.4% to $1,961.55 per ounce by 0700 GMT. U.S. gold futures GOLD were down 0.6% to $1,965.20.

The dollar index DXY held firm, making dollar-priced gold less attractive for overseas buyers.

"While a debt-ceiling deal has not been reached yet, comments from (House) Speaker (Kevin) McCarthy ... reduced safe-haven buying flows into gold," said Tim Waterer, chief market analyst at KCM Trade.

The dollar's momentum, fuelled by hawkish comments from Federal Reserve officials, has also been acting as a shackle on gold prices, Waterer said.

U.S. President Joe Biden and McCarthy could not reach an agreement on Monday on how to raise the $31.4 trillion debt ceiling with just 10 days before a possible default that could sink the economy but pledged to keep talking.

Keeping gold under pressure, St. Louis Fed President James Bullard said there might be a need to go higher on the policy rate. Rising rates hurt demand for the zero-yielding asset.

However, Michael Langford, director at corporate advisory AirGuide, said key risks for gold appear to be easing as Fed Chair Jerome Powell signalled that it may be time to pause rate rises.

Markets are now pricing in an 80.1% chance of the Fed standing pat on rates next month, the CME FedWatch tool showed.

Focus will also be on purchasing managers index (PMI) surveys from Europe, Britain and the United States later in the day, ahead of the release of minutes from the Federal Open Market Committee's May 2- 3 meeting on Wednesday.

Spot silver XAGUSD1! fell 0.9% to $23.44 per ounce, platinum PL1! ticked down 0.1% to $1,065.76, palladium XPDUSD1! shed 1% to $1,475.92.