Gold stays muted near seven week low, dollar holds firm

Published on May 18, 2023 12:45

Gold futures lost shine on general optimism in global equity markets as risk sentiment improved on progress in debt ceiling negotiations in the United States. The safe haven metal lost its appeal, breaking below the crucial level of $1980 an ounce yesterday, its lowest levels since 3rd April.

On the major market moving news, President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government`s $31.4 trillion debt ceiling and avoid an economically catastrophic default.

After a months long standoff, the Democratic president and the speaker of the House of Representatives on Tuesday agreed to negotiate directly on a deal. An agreement needs to be reached and passed by both chambers of Congress before the federal government runs out of money to pay its bills, as soon as June 1.

Huge fall in the fear index indicated stability and confidence in markets and hence low demand for the safe haven assets like gold. The VIX index, also known as the "fear index," which measures market volatility and investor expectations of near-term market volatility is down 30% under 19.95.

The dollar index jumped to nearly 2 months high at 102.80 levels in Asia today. Against Yen it jumped to a new two-week high at 137.45 yen. It also ticked higher against the euro and has gained more than 1% so far this month.

International bullion futures are seen trading at $1983.90 down $1 or 0.05%.