Gold rises as yields pull back with US debt debate in focus

Gold edged higher on Wednesday (24 May) due to a slight pullback in the dollar and Treasury yields amid the US debt ceiling deadlock, while minutes from the Federal Reserve's last policy meeting were also in focus for guidance on future interest rates.

Spot gold XAU= edged 0.2% higher to $1,977.69 per ounce by 0521 GMT US gold futures GCv1 were up 0.3% at $1,979.80.

Representatives of US President Joe Biden and congressional Republicans ended another round of debt-ceiling talks without a resolution on Tuesday as the deadline to raise the government's $31.4 trillion borrowing limit ticked closer.

Benchmark US 10-year Treasury yields retreated, while the dollar also eased, making gold cheaper for other currency holders.

"Focus ahead remains on the debt-ceiling impasse and Fed's rate-hike cycle," OCBC FX strategist Christopher Wong said.

"Fed remarks have been noisy and varied, but what is probably clear is that the Fed is saying that a pause is not an end to the tightening cycle, so there is still that risk of hike, dependent on how data pans out."

Interest rate hikes raise the opportunity cost of holding non-interest-bearing gold.

Minutes of the Fed's 2-3 May meeting, where the US central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range, are due later in the day.

Markets are currently pricing in a 71.5% chance of the Fed holding rates at its June 13-14 policy meeting, the CME FedWatch tool showed.

If the market concludes that rate hikes could resume or rates may be held at the peak without cuts through the rest of the year if all goes well, that would hurt gold, said Ilya Spivak, head of global macro at Tastylive.

Spot silver XAG= ticked 0.1% higher to $23.45 per ounce, platinum XPT= rose 0.5% to $1,052.70, and palladium XPD= gained 1% to $1,460.61.