Forexpros – Gold futures hit a two week low on Wednesday as the U.S. dollar soared on euro zone debt fears.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1564.55 a troy ounce during mid U.S. trade plunging 1.94%
It earlier hit a high of USD1595.75.
Gold futures were likely to find support at USD1562.95 and technical resistance exists at USD1605.85.
The U.S. dollar strength added to gold’s bearishness as nervous investors moved into the safe haven of the dollar instead of metals.
Light Christmas and New Years holiday volume added to the volatility as traders relaxed in preparation for 2012
Italy’s Treasury short term bond auction was a bright spot but the optimism faded quickly as concern over Thursday’s long term auction results escalated.
Adding to the dollar positive and commodity negative sentiment, the use of the European Central Bank’s overnight deposit facility reached an all time high of EUR452.03 billion on Tuesday. This increased fears that the ECB’s crisis lending programs are not sufficient to lift the banking sector out of it malaise.
For much of the last year, investor’s typical reaction to bad news from Europe was to buy gold, as its boosts safe haven appeal of the precious metal, but that relationship has unraveled recently.
Instead, gold futures have moved largely in line with other commodities and risk assets over the past month, with investors preferring the relative safety of the U.S. dollar.
Elsewhere on the Comex, silver for March delivery plunged 4.94%% to trade at USD27.32a troy ounce, while copper for March delivery dropped 1.28% to trade at USD3.36 a pound.
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