Investing.com– Gold prices hovered near two-month lows on Thursday as markets remained on edge over raising the U.S. debt limit, while copper prices fell further amid concerns over slowing economic growth and a weak outlook for demand.
Bullion prices stayed within a tight trading range- $1,950- $1,980 an ounce- seen over the past week, after the yellow metal slumped below the closely-watched $2,000 level.
Focus remained chiefly on negotiations among lawmakers over raising the U.S. spending limit, although neither Democrat nor Republican negotiators offered any cues on when a deal could be reached.
This also comes ahead of a June 1 deadline for a U.S. debt default, which could push the U.S. into recession and have dire consequences for the global economy. Ratings agency Fitch warned of a U.S. ratings downgrade in the event of a default.
But despite the market uncertainty, gold saw little safe haven demand as traders flocked to the . The greenback hit a two-month high on expectations that U.S. interest rates will remain higher for longer, as signaled by the Federal Reserve.
rose slightly to $1,959.09 an ounce, while fell 0.2% to $1,959.70 an ounce by 20:54 ET (00:54 GMT). Both instruments were trading close to their lowest levels since early-April.
The of the Fed’s May meeting showed on Wednesday that policymakers were hesitant to hike rates further amid growing pressure on the banking sector and increased economic headwinds. But the bank also appeared to have no plans for a rate cut, given that inflation was still too high.
Market expectations that the Fed will hike rates further in June were also growing, as shown by
Fed Fund futures prices
. This could spell more economic pain this year, as monetary policy remains restrictive.
The prospect of worsening economic conditions weighed heavily on industrial metal prices, with copper remaining under pressure on Thursday after hitting a near six-month low in the prior session.
steadied at $3.5692 a pound, and were near their weakest level since late-November. The red metal was slammed by several weaker-than-expected manufacturing activity readings this week.
Concerns over more deterioration in Chinese demand also weighed, as the country grapples with a new wave of COVID-19 infections that markets fear could further disrupt activity.
This comes as recent data showed an economic rebound in the country was running out of steam.