Gold prices range-bound as traders measure Fed policy path

Gold prices traded in a narrow range on Thursday with focus on the U.S. Federal Reserve's interest rate path as the passage of a bill to avert a debt ceiling default calmed investor fears.

Spot gold GOLD eased 0.2% to $1,958.61 per ounce by 0714 GMT. U.S. gold futures GOLD dipped 0.3% to $1,958.00. Bullion registered a monthly fall in May.

The recent downward pressure on gold has been due to "expectations that eventually the U.S. debt ceiling crisis must be resolved and that it would take some wind out of the sails of the gold market in general," Clifford Bennett, chief economist at ACY Securities said.

Investors had a muted response to the U.S. House of Representatives passing a bill, which could suspend the government's borrowing limit and avert a default, with the market focus now turning to the Senate and the interest rate outlook.

Most Asia-Pacific stock markets rose amid receding bets for a U.S. rate hike this month and relief over the passage of the bill.

In the short term, gold could trade higher near the $1,980 level, but don't expect an extreme move upside because markets are still speculating more rate hikes by the Fed, said Brian Lan, of Singapore dealer GoldSilver Central.

Federal Reserve officials including the vice chair-designate, however, pointed towards a rate hike "skip" in June, prompting a quick reversal of market expectations for another hike as the U.S. central bank weighed the value of caution against still strong inflation data.

Higher interest rates dull the appeal for zero-yield bullion.

On the data front, investors will now scan the weekly U.S. initial jobless claims data due at 1230 GMT.

Among other precious metals, spot silver XAGUSD1! fell 0.3% to $23.4108 per ounce, while palladium XPDUSD1! gained 1% to $1,375.60.

Platinum PL1! rose 0.7% to $999.89, but hovered near a seven-week low.