Forexpros – Gold futures erased modest gains on Wednesday, falling to a three-day low as the U.S. dollar strengthened ahead of the Federal Reserve’s rate statement later in the day, while ongoing concerns over the euro zone’s sovereign debt crisis also weighed on the precious metal.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,654.75 a troy ounce during early U.S. morning trade, shedding 0.59%.
It earlier fell by as much as 0.72% to trade at USD1,652.95 a troy ounce, the lowest since January 20.
Futures were likely to find short-term support at USD1,645.15 a troy ounce, the low of January 20 and resistance at USD1,681.65, the high from January 23.
Gold’s turnaround coincided with the U.S. dollar adding to gains against the euro, as concerns surrounding Greece’s ongoing debt crisis continued to weigh on the single currency.
Debt-strapped Greece was clinging to hope of a last minute bond swap deal to avoid a default after euro zone officials rejected a final offer from the country’s private bondholders.
Reports surfaced earlier that the European Central Bank was said to oppose restructuring its Greek bonds, adding to concern the nation will fail to win a deal to reduce its debt.
Further adding to the negative sentiment, the cost of insuring Portuguese government debt against default rose to a euro-lifetime high earlier, amid renewed fears the country may need a second international bailout.
Although gold is often seen as a safe haven during times of economic uncertainty, the increasingly grave debt crisis in the euro zone has done little to bolster prices recently.
A weakening euro and stronger U.S. dollar have weighed on gold instead. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.5% to trade at 80.39.
Meanwhile, markets awaited the conclusion of the Federal Reserve’s policy-setting meeting later in the day for indications on how Fed officials see Europe’s debt problems impacting the U.S. economy, as well as the need for further stimulus measures.
According to market participants, any signs that interest rates will stay lower for longer could put some pressure on the U.S. dollar, which is positive for gold prices. Indications of further easing initiatives in the U.S. are also considered bullish for prices.
The Fed was also expected to provide, for the first time in the central bank’s history, interest rate forecasts to markets, as well as its quarterly economic projections, timed to coincide with a news conference by Fed Chairman Ben Bernanke.
Gold prices edged higher during the Asian trading session as gold buying in top jewelry consumer India resumed after the country’s wedding season began last week. Gold jeweler is a popular gift at marriages and festivals in India.
Elsewhere on the Comex, silver for March delivery fell 0.58% to trade at USD31.78 a troy ounce, while copper for March delivery shed 0.47% to trade at USD3.791 a pound.
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