Gold retreats, adding to losses from worst week since February

Still, the dollar’s revival in recent weeks has coincided with a pullback in gold prices as a stronger greenback makes gold — which is priced in dollars — more expensive for buyers using rival currencies. The dollar index trades around 1.5% higher months to date.

“Although gold has fallen back from the near record high it surged to earlier in the month, it remains at a level that the precious metal has only traded at a smattering of times in its long history as market confidence remains fragile and investors are seeking gold to manage their risk,” said Rupert Rowling, market analyst at Kinesis Money, in daily commentary.

Debt-ceiling talks have ground to a standstill, with traders waiting to see whether a deal might be reached by the end of the week and if Monday’s talks yield any progress.

Gold had benefited from debt-ceiling and recession fears, and prospects for the U.S. to default on debt is “naturally bullish for [the metal] over the long term,” but “potential nervous updates before the June 1 deadline will not necessarily lead to gold aiming higher if the [U.S. dollar] moves higher as a result of concerning headlines from Washington,” said Jameel Ahmad, chief analyst at CompareBroker.io, in daily commentary.

“We must remember that even though both gold and the U.S. dollar are very much assets of safety, previous flashes of sudden rallies for the greenback … have unexpectedly been bad news for gold,” he said.

The markets will also be closely monitoring remarks from Federal officials this week as well as Wednesday’s release of minutes from the central bank’s policy meeting earlier this month.

On Monday, St. Louis Fed President James Bullard said he would like to see two more quarter-percentage-point interest-rate hikes this year. Minneapolis Fed President Neel Kashkari, however, told the Wall Street Journal in an interview published Sunday that he’s open to pausing rate hikes at the Fed’s next meeting in order to buy time to assess the inflation outlook and the effects of more than a year of rate increases.

With the biggest headwind of the last year, the Fed’s consistent hiking of interest rates, “seemingly drawing to a close and a trading environment that is still risk averse, gold has found significant support a little below the psychologically important threshold of $2,000 an ounce,” said Rowling.

“While a fresh push above $2,000 looks unlikely, assuming the U.S. debt ceiling talks do reach agreement, gold looks well supported and looks set to continue trading comfortably above $1,950 in the medium-term,” he said.