(Reuters) Gold prices steadied on Wednesday below the $2,000-mark as investors fretted over the outcome from the U.S. debt-limit negotiations, with a firmer dollar keeping prices in check.
Spot gold ticked up 0.2% to $1,992.56 per ounce by 0254 GMT. U.S. gold futures edged 0.1% higher to $1,995.10.
Gold has been well supported on price dips below $2,000 and with the debt ceiling "process dragging-on, there is some pent-up frustration in the market which is adversely affecting sentiment", and that could bring safe-haven flows into gold, Tim Waterer, chief market analyst at KCM Trade said.
U.S. President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming U.S. debt default, as the threat of an economic nightmare prompted Biden to cut short an Asia trip this week.
Bullion slipped from the $2,000 level on Tuesday after U.S. retail sales and hawkish remarks from Federal Reserve officials drove bets that interest rate cuts may be delayed and pushed the dollar higher.
A stronger dollar weighs on overseas demand for greenback-priced gold, while higher rates blunt non-yielding bullion's appeal.
"Any inflation-fighting rhetoric from Fed officials between now and the June meeting would hinder the gold price," Waterer further said, adding, the prevailing dollar strength was capping gold's upside for the time being.
Traders are currently pricing in a 77.7% chance of the U.S. central bank holding rates in June, according to the CME FedWatch tool.
In the broader market, Asian shares were subdued as investors remained risk averse, with the U.S. debt ceiling talks and a mixed set of economic data weighing on sentiment.
Among other precious metals, spot silver rose 0.3% to $23.80 per ounce, platinum advanced 0.6% to $1,063.79, and palladium added 0.1% to $1,503.49.