Gold firms; set for monthly loss on dollar strength, Fed's rate hike bets

Bars of gold are seen at the Krastsvetmet company, one of the world's largest producers of precious metals in Moscow, Russia on January 31, 2023. 
Alexander Manzyuk | Anadolu Agency | Getty Images

Gold firmed on Wednesday supported by lower Treasury yields but the dollar's strength, with more interest rate hikes in the offing and optimism about a U.S. debt deal kept bullion on course for its first monthly dip in three.

Spot gold was last up 0.2% at $1,963.09 per ounce. It has lost nearly 1.1% this month and over $100 from near-record highs scaled earlier in May.

U.S. gold futures settled 0.3% higher at $1,982.10.

We've had kind of a push-pull effect," amid support from lower yields and pressure from the dollar, said David Meger, director of metals trading, High Ridge Futures.

"With the job's data relatively strong, concern about the possibility of further rate hikes would obviously have a tendency to pressure gold... and yet on the other side, we have the PMI data pulling in the opposite direction."

The dollar index headed for a monthly gain, making bullion less attractive to overseas buyers.

Investors priced in a in 68.8% chance of a 25 basis point hike in the Federal Reserve's June meeting versus 60% before the jobs data.

High interest rates dim appeal for zero-yield gold.

But key support around $1,950 could fuel momentum trade to push gold back to $2,000, said Edward Moya, senior market analyst at OANDA.

Traders also focussed on developments around the U.S. debt ceiling, with the U.S. House of Representatives due to vote on a bill to lift the limit.