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Gold prices steadied on Thursday as the dollar pulled back slightly from a seven-week peak, while traders focused on negotiations in Washington over raising the U.S. debt ceiling.

Spot gold held its ground at $1,983.79 per ounce by 0249 GMT. U.S. gold futures steadied at $1,986.60.

The dollar index eased on the day, after hitting a seven-week high in the previous session, partly due to traders dialling back expectations of a rate cut by the Federal Reserve this year.

Gold could remain in the $1,965-$2,020 range over the next two weeks, but the general trend remains fairly weak, as increasing optimism around the debt ceiling is also likely to heap pressure on bullion, said Edward Meir, metals analyst at Marex.

Many of the U.S. macro numbers have come in stronger than expected and this is leading to perceptions that the Fed will probably not pause in June, and the spectre of higher rates is bearish for gold, Meir added.

U.S. President Joe Biden and top congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government's $31.4 trillion debt ceiling and avoid an economically catastrophic default.

U.S. Treasury yields also rose on Wednesday amid some cautious optimism around lawmakers' talks to raise the U.S. debt ceiling and on the back of strengthening expectations of higher-for-longer interest rates.

Markets are currently pricing in a 76.2% chance of the U.S. central bank holding rates at the current level in June, according to the CME FedWatch tool. Rising interest rates dull non-yielding bullion's appeal.

Spot silver was flat at $23.72 per ounce.

OCBC FX strategist Christopher Wong said the decline in silver so far this month "could be closer to some tentative stabilisation."

Platinum fell 0.2% to $1,067.06, while palladium steadied at $1,488.08.