Gold continues to face pressure around the $1940 mark as the European session trims its losses. The current downward pressure on the yellow metal can be attributed to the broad demand for the US Dollar, driven by a hawkish Federal Reserve outlook and renewed concerns over the US debt deal.

While policymakers in the US have signalled an agreement to raise the debt ceiling and avoid default, gold faces additional pressure due to an improved appetite for risk-driven assets. As a result, spot gold XAU/USD saw a 0.2% decline to $1,935 per ounce, and gold futures dropped to $1,959.50 per ounce during early European trade.

The focus for this week now turns to key economic indicators from the United States, particularly the nonfarm payrolls data for May. This data will provide insights into how much the Federal Reserve may potentially raise interest rates. Last week's data revealed an unexpected rise in the Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, indicating that inflation remained persistent.

This upward trend in inflation, combined with any signs of resilience in the job market, will likely reinforce expectations for a rate hike in June. Market indicators, such as Fed Fund futures prices, currently show a greater than 60% probability of a 25 basis points rate hike in the upcoming meeting.

The US Dollar is trading at two-month highs due to these expectations of future rate hikes, resulting in a retreat in metal prices. The prospect of higher interest rates negatively impacts non-yielding assets like gold.