Gold heading for first monthly loss

Gold prices steadied on Wednesday yet was headed for its first monthly decline in three as the US dollar climbed on expectations the Federal Reserve would keep interest rates higher for longer than previously thought.

Spot gold was largely unchanged at $1,958.69 per ounce by 1123 GMT. It has lost nearly 1.6% so far this month and $120 from its near-record highs earlier in May.

U.S. gold futures held steady at $1,976.30.

“The strong U.S. dollar is likely to remain a headwind for gold prices. With the banking crisis on the back burner and the debt ceiling debacle all but resolved, the focus turns back to the inflation fight,” Ilya Spivak, head of global macro at Tastylive, said.

Global shares fell ahead of a vote in Washington on the U.S. debt ceiling, while the U.S. dollar hit a more than two-month high after data showed China’s recovery is stalling.

“Gold will probably remain at its current level over the next few days as safe haven demand related to uncertainty about the debt ceiling persists,” said Edward Gardner, commodities economist at Capital Economics.

In the near term, gold faces headwinds from a stronger dollar and expectations of the Fed raising rates and holding them at a high, Gardner added.

Fed Bank of Cleveland President Loretta Mester sees no compelling reason to wait to implement another interest rate hike, Financial Times reported on Wednesday.

Fed funds futures expect a 62% chance of a 25 bps hike in the central bank’s June 13-14 meeting, with rate cuts being priced out for the second half of the year.

Interest rate hikes remain a headwind for gold since that translates into higher opportunity cost of holding non-yielding bullion.

Elsewhere, spot silver rose 0.4% to $23.32 per ounce, platinum fell 0.1% to $1,012.97, while palladium was down 0.5% at $1,394.39. All three were set for a monthly drop.