Forexpros – Gold futures traded lower during U.S. afternoon trade Wednesday, as concerns over the euro zone’s debt crisis and weaker-than-expected U.S. data on durable goods fuelled a flight to safety to the greenback.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,661.95 a troy ounce during U.S. afternoon trade, plummeting 1.53%.
Gold futures were likely to find short term support at USD1,657.65 a troy ounce, Monday’s low and short-term resistance at USD1,706.15, the high from March 13.
Gold prices followed currencies, tracking movements in the U.S. dollar. 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.
The metal came under pressure amid reports that the German government’s unwillingness to increase the firepower of the euro zone’s combined bailout funds to EUR1 trillion will complicate efforts to boost the lending capacity of the International Monetary Fund that is needed for future European bailouts.
Traders await Friday’s meeting of euro zone finance ministers in Copenhagen.
Spain’s debt problems also influenced gold’s price after a report from Wall Street bank Citigroup said that the risk of a Spanish debt restructuring is higher now than it has been since the beginning of the crisis.
Also weighing on market sentiment, the U.S. Commerce Department stated that durable goods orders rose 2.2% in February, partially reversing January’s revised 3.6% decline, but fell short of expectations for a 3.0% increase.
Core durable goods orders, which exclude transportation, rose by a seasonally adjusted 1.6% in February, compared to expectations for a 1.5% gain.
The news boosted demand for the relative safety of the U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.04% to trade at 79.31.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Some technical selling also weighed after prices failed to break above a key resistance level close to USD1,700 an ounce.
Meanwhile, Goldman Sachs said in a report earlier that it remains bullish on the precious metal, reiterating its six-month price forecast at USD1,840 an ounce.
“As we look forward, our U.S. economists forecast subdued growth and further easing by the Fed in 2012, which should push the market’s expectations of real rates back down near zero basis points and gold prices back to our six-month forecast of USD1,840 an ounce.”
Elsewhere on the Comex, silver for May delivery dropped 1.89% to trade at USD31.99 a troy ounce, while copper for May delivery tumbled 2.08% to trade at USD3.795 a pound.
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