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Gold prices were subdued on Thursday despite a retreat in the U.S. dollar and Treasury yields.
Spot gold edged down 0.1 percent to $1,960.88 per ounce, while U.S. gold futures were down 0.2 percent at $1,977.80.
Improved risk sentiment weighed on bullion after the bill to raise debt limit and cap government spending in the U.S. was passed by a wide margin on late Wednesday, days before the world's biggest economy is due to start defaulting on its debt.
The U.S. Senate must vote on the bill later this week before President Joe Biden can sign it into law.
The downside in gold prices remained capped after Philadelphia Federal Reserve President Patrick Harker as well as Fed Governor and vice chair nominee Philip Jefferson signaled willingness to skip raising rates next month to assess incoming data.
On the economic front, a private survey showed China's manufacturing activity unexpectedly swung to growth in May.
Elsewhere, PMIs for the euro zone moved further below breakeven despite factories cutting prices for the first time since September 2020.
