Forexpros – Gold futures rallied to a one-month high on Tuesday, as the U.S. dollar weakened against its major counterparts, boosting the appeal of the precious metal, while strong physical demand in India lent further support.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,661.15 a troy ounce during early European morning trade, rallying 1.85%.
It earlier rose by as much as 2.05% to trade at USD1,667.95 a troy ounce, the highest since December 13.
Gold futures were likely to find support at USD1,631.95 a troy ounce, the previous session’s low and resistance at USD1,681.55, the high of December 13.
Official data released earlier showed that China’s economy expanded at an annualized rate of 8.9% in the fourth quarter, slowing from the previous quarter’s 9.1% rate, but slightly better than expectations for an 8.8% increase.
Other key China reports including retail sales and industrial output figures also beat forecasts, easing fears over a ‘hard landing; in the world’s second largest economy.
The upbeat data lifted market sentiment, prompting investors to shun safe haven assets, such as the U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.5% to trade at 81.25.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Meanwhile, gold prices continued to draw support from strong physical demand in India. The country’s wedding season restarted on January 15 and will continue until April, after pausing for a few weeks deemed inauspicious for nuptials.
Gold jewelry demand in India, the world’s biggest buyer, was forecast to increase 5% to 7% in 2011 and is set to grow a further 10% to 15% this year, according to the head of Gitanjali Gems, India’s biggest jewelry retailer.
Gold traders were also eyeing developments surrounding the euro zone’s debt crisis after Standard & Poor’s downgraded the triple-A rating of the euro zone’s bailout fund, the European Financial Stability Facility, by one notch late Monday.
The threat of a default by Greece continued, as talks aimed at negotiating a restructuring of the country’s debts remained deadlocked, amid disagreements over a bond swap with private creditors.
Elsewhere on the Comex, silver for March delivery surged 2.25% to trade at USD30.18 a troy ounce, while copper for March delivery rallied 2.9% to trade at USD3.743 a pound.
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