Gold trades in tight range on US debt limit deal, Fed rate hike bets

Gold prices were flat on Monday, stuck in a tight range as a tentative deal sealed over the weekend to suspend the U.S. debt ceiling coupled with jitters around higher-for-longer interest rates dampened demand for the non-yielding metal.

Spot gold GOLD was listless at $1,946.84 per ounce by 0652 GMT, hovering near two-month lows hit on Friday. U.S. gold futures GOLD were up 0.1% at $1,946.40.

Hurting gold's appeal as a safe-haven asset, U.S. President Joe Biden on Sunday said he had finalised a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025, and that the deal was ready to move to Congress for a vote.

Meanwhile, data on Friday showed U.S. consumer spending increased more than expected in April and that inflation accelerated.

The report raised to 65.3% the chances of a 25-basis-point increase by the U.S. central bank in June, and rates staying there for the rest of the year, according to the CME FedWatch tool.

"The fact that the odds of a hike were as low as 17.4% just over a week ago show how expectations for a Fed pause have been abandoned, helping the U.S. dollar rise for a third week and weigh on gold prices," City Index senior market analyst Matt Simpson said.

Gold, which offers no yield of its own, tends to fall out of favour with investors when interest rates rise.

The dollar index DXY was near a two-month peak but down 0.2% on the day, making bullion more affordable for overseas buyers.

Gold is expected to break a support at $1,938 and fall into the $1,919-$1,929 range, according to Reuters technical analyst Wang Tao.

Spot silver XAGUSD1! fell 0.5% to $23.20 per ounce, platinum PL1! edged 0.1% higher to $1,023.64, and palladium XPDUSD1! rose 0.6% to $1,431.90.

Trading will likely be thin with the United States and many markets in Europe closed for a holiday on Monday.