Gold prices held close to a two-month low on Tuesday as optimism over a US debt ceiling deal and reduced bets for a pause in the Federal Reserve's rate hike policy in June dented the metal's appeal.
Spot gold was down 0.2% at $1,938.57 per ounce by 0448 GMT. US gold futures dipped 0.3% to $1,938.30, Reuters reported.
US President Joe Biden said on Monday he feels good about prospects for passage by Congress of the debt ceiling deal that he reached with House of Representatives Speaker Kevin McCarthy.
The high volatility events such as the US regional banking crisis, and whether or not an agreement would be reached on raising the US debt ceiling are now passing, "reducing the markets interest in gold as investors seek alpha," Michael Langford, director at corporate advisory AirGuide said.
Fed officials on the other hand have in recent days turned up the heat with a hawkish outlook on interest rates, and that has to some extent also offset safe-haven flows around the US debt ceiling situation as higher interest rates dull the appeal for zero-yield bullion.
Having navigated the financial crisis of 2008, Minneapolis Fed President Neel Kashkari worries about systemic risks. But now, as a US monetary policymaker, he worries even more about inflation.
"If later in the year a more dovish approach is taken, this then implies some level of easing of interest rates may occur, which will be seen as bullish for equities and also reduce the desire for investors to hold gold versus other more risk on asset classes," Langford noted.
Markets are now pricing in a 39.9% chance of the Fed keeping rates on hold in June.
Spot silver eased 0.7% to $23.03 per ounce, while platinum rose 0.3% to $1,027.27.
Palladium gained 1.1% to $1,430.74.