Commodity Market: Gold heads for third straight weekly loss ahead of US PCE data, debt ceiling talks eyed

Spot Gold rebounded from a two-month low on Friday, but was still on track to register a third consecutive week of losses, as market players closely watched the progress of US debt ceiling talks as well as the Federal Reserve’s interest rate hike trajectory.

The situation surrounding debt ceiling negotiations between U.S. President Joe Biden and Republican Kevin McCarthy continued to weigh on market sentiment, underpinning safe haven US Dollar.

President Biden and House Speaker McCarthy on Thursday appeared to be moving closer to an agreement, which would raise the debt ceiling for two years and cap spending on most items other than military and veterans.

“Today’s moderating U.S. dollar has carved out some breathing space for bullion,” Han Tan, chief market analyst at Exinity, was quoted as saying by Reuters.

“The precious metal’s upside remains capped by the imminent prospects of a U.S. debt deal, coupled with the fact that markets have more room before fully pricing in yet another Fed rate hike by July.”

Meanwhile, market players are now awaiting the report on US Personal Consumption Expenditures (PCE) due out at 12:30 GMT for further clues over interest rates.

Markets are currently pricing in a 41.7% chance of another 25 basis point interest rate hike by the Federal Reserve at its June policy meeting.

Expectations that the central bank will start reducing rates in 2023 have been scaled back.

As of 10:54 GMT on Friday Spot Gold was gaining 0.63% to trade at $1,952.81 per troy ounce. Earlier on Friday, the precious metal went down as low as $1,936.81 per troy ounce, which has been its weakest price level since March 22nd ($1,934.34 per troy ounce).

The commodity was on course for a third straight weekly loss, being down 1.28% so far this week.

Gold Futures for delivery in June were gaining 0.48% on the day to trade at $1,953.05 per troy ounce, while Silver Futures for delivery in July were up 1.55% to trade at $23.265 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.22% to 103.979 on Friday. Yesterday the DXY went up as high as 104.312, which has been its strongest level since March 17th (104.445).