As traders maintained an eye on the U.S. debt-ceiling negotiations, gold slipped below $2,000 on Tuesday as a result of hawkish comments from Federal Reserve officials and hawkish U.S. economic statistics.
At 11:50 a.m. EDT (1550 GMT), spot gold was 1.2% down at $1,996.29 per ounce after hitting its lowest level in two weeks at $1,994.59 earlier.
American gold futures decreased 1.1% to $2,000.20.
Although April's U.S. retail sales growth was weaker than anticipated, the underlying trend remained positive, boosting the dollar and pushing 10-year Treasury rates to a two-week high. [USD/] [US/]
Thomas Barkin, president of the Richmond Fed, said that he would be “comfortable” hiking interest rates higher if necessary to combat inflation. According to Cleveland Fed president Loretta Mester, the American central bank is still not in a position to maintain rates constant for an extended length of time.
This came after several Fed members made hawkish remarks on Monday.
According to Craig Erlam, a senior market analyst at OANDA, “we needed to see more signs of a pivot from the Federal Reserve and we haven't really seen that yet.”
Though it is seen as a hedge against economic risks, high interest rates reduce the attraction of non-yielding bullion.
However, Phillip Streible, chief market analyst at Blue Line Futures in Chicago, advised traders to continue purchasing gold at every price decline “as they wait out this debt ceiling fiasco”.
At 3 p.m. EDT, Democratic President Joe Biden and senior legislative Republican Kevin McCarthy will meet to discuss a compromise to increase the debt limit and prevent an unthinkable economic disaster.
To $23.65 an ounce, spot silver fell 1.9%. Palladium dropped 1.7% to $1,505.88 and platinum lost 0.4% to $1,060.56.
