Shafaq News / Gold prices were set for their first monthly drop in three on Wednesday, as progress on the U.S. debt ceiling deal and expectations that the Federal Reserve will likely raise interest rates further bolstered the dollar.

Legislation brokered by U.S. President Joe Biden and House Speaker Kevin McCarthy to raise the $31.4 trillion debt ceiling and achieve new federal spending cuts passed an important hurdle, advancing to the full House of Representatives for debate and an expected vote on passage on Wednesday.

Spot gold held steady at $1,960.79 per ounce by 0658 GMT. It has lost 1.5% so far this month. U.S. gold futures rose 0.2% to $1,959.80.

An overnight decline in Treasury yields has allowed gold prices to defend a support confluence zone at the $1,940 level for now, said Yeap Jun Rong, a market analyst at IG.

But intermittent bounces since early-May have been short-lived, which raises the chances that it could be the same this time round as well, he said.

Gold prices have come off their recent near-record highs reached early in May, in part pressured by expectation that the U.S. central bank was more likely to hike rates next month than leave them unchanged.

Investors remain cautious and that has triggered some uncertainty in bullion prices, said Hareesh V, research head at Geojit Financial Services. He also said the performance of the dollar and upcoming U.S. non-farm payroll would also influence the sentiment of traders.

A break of the $1,930 level may extend weakness but is unlikely to move past $1,800 in the immediate run, he added.

Elsewhere, top gold consumer China's factory activity shrank faster than expected in May, heaping pressure on policymakers to shore up a patchy economic recovery.

Spot silver was up 0.8% at $23.3988 per ounce, platinum added 0.6% to $1,020.33, and palladium gained 1.5% to $1,421.55, but were all set for a monthly drop.

(Reuters)