Forexpros – Gold futures edged higher in thin trade on Thursday, firming above USD1,600-an-ounce as a broadly weaker U.S. dollar underlined prices amid ongoing concerns over the euro zone’s sovereign debt crisis.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,616.45 a troy ounce during early European morning trade, gaining 0.18%.
It earlier rose by as much as 0.25% to trade at a daily high of USD1,617.75 a troy ounce.
Gold futures were likely to find short-term support at USD1,595.45 a troy ounce, the low of December 20 and resistance at USD1,643.65, Wednesday’s high.
Trading volumes were expected to remain light ahead of the Christmas holiday weekend, as many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Gold’s gains came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, declined 0.43% to trade at 80.01.
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.
Concerns over the health of European lenders intensified on Wednesday after the European Central Bank allotted EUR489 billion to 523 European banks in its first offer of unlimited three-year loans.
However, the move failed to alleviate concerns over the financial crisis in the region as the scale of the operation indicated that European lenders believe that funding shortages were likely to continue into 2012.
For much of the last year, investors’ typical reaction to bad news from Europe was to buy gold, as it boosts the 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-sensitive assets over the past month, with investors preferring the U.S. dollar and U.S. Treasuries as their safe havens of choice.
Elsewhere on the Comex, silver for March delivery rallied 1.2% to trade at USD29.60 a troy ounce, while copper for March delivery climbed 0.77% to trade at USD3.421 a pound.
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