Forexpros – Gold futures rallied above the key USD1,600-an-ounce level during U.S. morning trade on Wednesday, as the appeal of the precious metal was boosted by speculation the Federal Reserve will introduce fresh stimulus measures to boost U.S. economic growth.
A broadly weaker U.S. dollar also contributed to gains.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,602.75 a troy ounce during U.S. morning trade, rallying 1.7%.
It earlier rose by as much as 1.8% to trade at USD1,605.15 a troy ounce, the highest since July 6.
Gold futures were likely to find support at USD1,562.45 a troy ounce, the low from July 23 and near-term resistance at USD1,609.85, the high from July 6.
Gold prices were boosted after the Wall Street Journal reported that a growing number of Fed officials have concluded that the central bank needed to expand its stimulus program in order to boost growth and increase job hiring in the world’s largest economy.
Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 12% since late February, as the Fed failed to deliver more easing and amid concerns over the euro zone’s deepening debt crisis, which has fueled demand for the precious metal’s hedge, the greenback.
Gold traders are looking ahead to the Fed’s next policy meeting on July 31 and August 1 for clues on the central bank’s attitude towards a next round of bond purchases, known as quantitative easing.
Meanwhile, the euro found strong support after European Central Bank Governing Council member Ewald Nowotny said that there were some arguments in favor of giving the euro zone’s bailout fund, the European Stability Mechanism, a banking license, which would increase its firepower to fight the debt crisis.
Elsewhere, the yield on Spanish 10-year bonds eased back to 7.48% from a record 7.73% earlier Wednesday.
The euro bounced off the lowest level since June 2010 against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, fell 0.35% to trade at 83.78.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Elsewhere on the Comex, silver for September delivery climbed 1.5% to trade at USD27.21 a troy ounce, while copper for September delivery added 1% to trade at USD3.387 a pound.
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