Forexpros – Gold prices dipped in early Asian trading Tuesday as investors sold the metal for its traditional hedge, the dollar, on news voters in Europe, sick of painful austerity measures such as spending cuts and layoffs, voted for sweeping change in French and Greek weekend elections.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded down 0.08% at USD1,637.85 a troy ounce.
Gold traded at a low of USD1,637.75 a troy ounce and hit a high of USD1,639.95 a troy ounce during the session.
The precious metal sought to test support at USD1,626.85 a troy ounce, the low of May 4, and resistance at USD1,642.95, the high on May 7.
Election results in France and Greece over the weekend sent investors running for cover in the U.S. dollar, a traditionally safe-haven currency, and selling gold in the process.
In France, socialist Francois Hollande swept into victory over President Nicolas Sarkozy, as voters rejected harsh austerity measures supported by the outgoing administration and opted to embrace Hollande’s calls to prioritize growth over cutting spending.
In Greece, the country’s leading political parties failed to secure 50 percent of the votes in parliamentary elections, with far-left and far-right fringe parties eating away at the establishment’s hold on power.
Greek election results especially roiled markets worldwide.
Fears grew after the elections that any policy shifts in Athens could lead to a rejection of austerity measures demanded by the International Monetary Fund, the European Commission and the European Central Bank in exchange for bailout assistance.
Such a move could involve Athens abandoning the euro down the road, which could roil markets and threaten Europe’s recovery.
Uncertainty clouding the European political landscape sent investors ditching the euro and stocking up on dollars, which sent gold falling.
However, gold serves as a hedge not only against the dollar but to other paper currencies as well, and market talk grew that investors could buy gold as a fresh hedge against a weakening euro should the currency continue its slide in the coming days.
Lackluster physical demand in Asia failed to offset the yellow metal’s decline.
Elsewhere on the Comex, silver for July delivery was down 0.13% and trading at USD30.083 a troy ounce, while copper for July delivery was down 0.61% and trading at USD3.735 a pound.
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