Published - May 30th, 2023 @ 11:30 AM (GMT+2 )

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Gold Prices Plummet to Two-Month Low Amidst Strengthening Dollar

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Gold prices descended to a two-month nadir on Tuesday, reacting to a buoyant dollar amidst renewed confidence in the US debt ceiling agreement and anticipated alterations in the Federal Reserve's rate hike stance in June. The current financial climate is causing a decrease in demand for the non-interest-bearing asset.
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Spot gold experienced a marginal decline of 0.3%, bringing it down to $1,937.99 per ounce at 0719 GMT, the lowest since March 17. Concurrently, US gold futures dipped slightly by 0.4%, settling at $1,936.80.
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Prospects for US Debt Ceiling Deal Boost Dollar
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On Monday, US President Joe Biden expressed optimism about Congress passing the debt ceiling deal he achieved with House of Representatives Speaker Kevin McCarthy. Events like the regional banking crisis in the U.S. and the uncertainty around the US debt ceiling, which previously caused market volatility, are now resolving, "which lessens the appeal of gold for investors aiming for higher returns," noted Michael Langford, a director at corporate advisory firm AirGuide.

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Gold's Near-Term Outlook Vulnerable Amidst Market Changes

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Recently, Fed officials have suggested a bullish outlook on interest rates, offsetting some of the market fears surrounding the U.S. debt ceiling scenario. This shift in stance might undermine the attraction of gold, which offers zero yield.
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"If we see a dovish approach later this year, it would indicate potential easing interest rates, which would be perceived positively for equities. This would further lessen the appeal of gold in favor of other, riskier asset classes," Langford further commented.
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Currently, the market estimates a 37% possibility of the Fed retaining its current interest rates until June.
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Analysts warn that gold's short-term prospect is uncertain, with the potential of prices sliding to $1,892 if they fail to recover beyond $1,940 on Tuesday. This projection comes from OCBC FX strategist Christopher Wong.

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Mixed Results for Other Precious Metals

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Meanwhile, spot silver declined by 0.7% to $23.03 per ounce, but platinum and palladium witnessed slight gains, with the former rising 0.2% to $1,026.71 and the latter growing by 1.3% to $1,433.63.

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