(Reuters) Gold prices edged lower on Monday as a tentative deal sealed over the weekend to suspend the U.S. debt ceiling coupled with jitters around higher-for-longer interest rates dampened demand for the non-yielding metal.
Spot gold was down 0.1% at $1,944.09 per ounce by 0252 GMT, hovering near two-month lows hit on Friday. U.S. gold futures were listless at $1,943.30.
Hurting gold's appeal as a safe-haven asset, U.S. President Joe Biden said on Sunday he had finalized a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025 and that the deal was ready to move to Congress for a vote.
Moreover, data on Friday showed U.S. consumer spending increased more than expected in April and that inflation accelerated.
The report raised the chances of a 25-basis-point hike by the U.S. central bank in June to 65.3% and rates staying there for the rest of the year, according to the CME FedWatch tool.
"The fact the odds of a hike were as low as 17.4% just over a week ago show how expectations for a Fed pause have been abandoned, helping the US dollar rise for a third week and weigh on gold prices," City Index senior market analyst Matt Simpson said.
Gold, which offers no yield of its own, tends to fall out of favour among investors when interest rates rise.
The dollar index was firm and made bullion more expensive for holders of other currencies.
Asian shares and U.S. stock futures rose as the deal to suspend the U.S. government's debt ceiling ended a protracted stalemate.
Spot silver fell 0.2% to $23.26 per ounce, platinum edged 0.1% higher to $1,023.83, and palladium rose 0.3% to $1,428.07.
Trading will likely be thin on Monday, with the United States and many markets in Europe closed for holidays.