Forexpros – Gold futures traded lower during U.S. afternoon trade Monday, as increased Spanish worries that the nation will require a full-scale sovereign debt bailout and fresh concerns over a Greek exit from the euro zone triggered safe haven greenback buying.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,577.25 a troy ounce during U.S. afternoon trade, giving back 0.35%.
It earlier plunged by as much as 1.3% to trade at a session low of USD1,562.45 a troy ounce, which was the lowest since July 12.
Gold futures were likely to find support at USD1,554.55 a troy ounce, the low from July 12 and near-term resistance at USD1,591.35, the high from July 19.
Powering the U.S. dollar and depressing gold prices, the yield on Spanish 10-year bonds rose to a record 7.57% on Monday, well above the 7% threshold widely considered unsustainable in the long term, amid growing fears that Spain will need a full bailout after the state of Murcia followed Valencia in requesting financial aid from Madrid over the weekend.
Spanish media reported that several others among Spain’s 17 semi-autonomous regions are expected to follow, including the two biggest regions, Catalonia and Andalucia.
Meanwhile, fears over a Greek exit from the euro zone resurfaced, amid worries whether Athens can meet the conditions of its international bailout ahead of a meeting with the Troika on Tuesday.
The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the dollar and U.S. Treasuries.
The euro sunk to 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, added 0.30% to trade at 83.86.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent months.
A weakening euro and stronger dollar have weighed on gold instead, as the precious metal has been moving in tandem with riskier assets since hitting a record high of USD1,920 last September.
Gold has lost some of its safe haven appeal to the dollar, U.S. Treasuries and German Bunds, partly as a strengthening dollar makes the metal less attractive to buyers holding other currencies.
Elsewhere on the Comex, silver for September delivery plunged 0.92% to trade at USD27.053 a troy ounce, while copper for September delivery gave back 2.37% to trade at a four-week low of USD3.366 a pound.
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