Gold ends 1.1% down at 8-week low

Gold prices fell sharply at settlement today, May 25, as investors assessed the prospects for the Federal Reserve’s monetary policy amid the release of some economic readings.

The US dollar index, which gauges the greenback's strength against a basket of six currencies, rose to a more than two months peak, as uncertainty about the US debt ceiling talks mounted. This is besides the release of economic data that project the continuation of the Fed’s policy tightening cycle.

Initial claims for state unemployment benefits added 4,000 applications to a seasonally adjusted 229,000 for the week ended May 20, indicating the continued strength of the US labor market, according to data published by the Department of Labor.

Elsewhere, data from the US Department of Commerce showed the economy grew at an annual rate of 1.3% during the first quarter of this year, surpassing initial estimates for 1.1%.

Fed Governor Christopher Waller said, “whether we should hike [interest rates] or skip at the June meeting will depend on how the data come in over the next three weeks." However, he stressed it is premature to declare the tightening cycle is over.

Christopher Waller, a member of the Federal Reserve Board of Governors, said of the decision of the June meeting that it will depend on how the data is released over the next three weeks.

According to the CME's FedWatch Tool, the implied odds that the Fed will lift interest rates by 25 basis points during the forthcoming June elevated to around 50%.

In terms of trading, bullion for June delivery edged 1.10% lower, or $20.90, to finish at $1,943.70 an ounce — the lowest close since March 16.

Meanwhile, the US dollar index climbed 0.30% to reach 104.20 points at 08:34 pm Makkah time — the highest level since March 17.