Gold prices eased on Wednesday as the dollar gained after comments from U.S. Federal Reserve officials played down prospects of interest rate cuts this year.

Spot gold fell 0.1% to $1,986.60 per ounce by 1153 GMT, close to a two-week low hit on Tuesday. U.S. gold futures also fell 0.1% to $1,991.50.

The dollar index hit a six-week high. Gold competes with the dollar as a safe store of value, and gains in the currency make bullion less attractive for overseas buyers.

"It seems some market participants still anticipate another rate hike by the U.S. Fed," UBS analyst Giovanni Staunovo said.

On Tuesday, Chicago Fed President Austan Goolsbee said it was premature to discuss rate cuts, while Atlanta Fed President Raphael Bostic said the Fed would need to stay "super strong" in fighting inflation even if the unemployment rate starts to rise later in the year.

High interest rates increase the opportunity cost of holding non interest-bearing bullion.

Traders are pricing in a 78.6% chance of the Fed standing pat on rates in June, according to the CME FedWatch tool.

"While the short-term outlook points to further consolidation as we await incoming economic data, we keep an overall bullish outlook for gold," Ole Hansen, head of commodity strategy at Saxo Bank, in a note. He cited dollar-weakness, peaking Fed interest rates, and demand from central banks.

However, lingering fears of a U.S. debt default and its economic fallout kept a floor under gold prices.

U.S. President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming default.

Silver was down 0.2% to $23.69, platinum jumped 1.3% to $1,071.09 while palladium fell 0.2% to $1,498.22.

(Reporting by Kavya Guduru in Bengaluru, additional reporting on Seher Dareen Editing by Mark Potter and Barbara Lewis)