Forexpros – Gold futures edged modestly lower during early European trade on Monday, seeking cues from the currency market as muted physical demand in key Asian markets weighed on the precious metal.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,667.45 a troy ounce during early European trade, dipping 0.27%.
It earlier fell by as much as 0.3% to trade at a session low USD1,667.05 a troy ounce.
Gold futures were likely to find support at USD1,627.75 a troy ounce, the low from March 22 and resistance at USD1,699.55, the high from March 27.
Gold prices were higher earlier in the session as investors moved out of the U.S. dollar and in to riskier assets as market participants cheered a report showing Chinese manufacturing gained momentum in March.
The state-affiliated China Federation of Logistics and Purchasing said Sunday that its purchasing managers index rose 2.1 points to an 11-month high of 53.1 in March, up from February’s 51.0. A reading above 50 signifies expansion.
However, a separate report from HSBC showed that manufacturing activity in the Asian nation contracted for the fifth consecutive month and recorded its lowest average reading in three years during the first quarter.
The conflicting data was not enough to offset recent worries about the heath of the Chinese economy.
Gold prices found support from modest gains in the euro. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
On Friday, euro zone finance ministers agreed to strengthen the region’s debt firewall, but concerns remained over whether the measures would be enough to prevent contagion to Spain and Italy.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, eased down 0.04% to trade at 79.08.
Meanwhile, bullion dealers noted muted physical demand in Asia, as markets in China remained closed and a nationwide strike by bullion and jewelry dealers in India entered its third week.
Most Indian jewelry and gold shops have remained closed since March 18 after the country announced a 4% import duty hike on gold and a 0.3% excise tax on most gold jewelry.
According to local traders, imports could decline by as much as 35% in 2012 from a record 969 tonnes a year earlier, while the industry might face more difficult time in coming days as marriage season begins.
India is the world’s top gold consumer.
Elsewhere on the Comex, silver for May delivery eased up 0.05% to trade at USD32.50 a troy ounce, while copper for May delivery rose 0.65% to trade at USD3.849 a pound.
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