Forexpros – Gold futures extended sharp gains from the previous session on Wednesday, jumping to a one-week high as the U.S. dollar was broadly weaker ahead of the European Central Bank’s first offer of three-year loans later in the day.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,632.25 a troy ounce during early European morning trade, climbing 0.91%.
It earlier rose by as much as 1% to trade at USD1,633.35 a troy ounce, the highest since December 14.
Gold futures were likely to find support at USD1,595.45 a troy ounce, the previous day’s low and short-term resistance at USD1,645.65, the high of December 14.
Appetite for riskier assets strengthened ahead of the ECB’s operation, as investors hoped it will help the region’s lenders lower their funding costs and avoid a liquidity crunch in the euro zone.
More than 10 Italian banks were expected to apply for the loans by using state-guaranteed bonds as collateral.
The euro rose to a six-day high against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, fell 0.4% to trade at 79.90, the lowest since December 12.
Gold prices often move inversely to the U.S. dollar, as gold becomes less expensive for buyers using other currencies.
Meanwhile, French lender BNP Paribas reiterated its bullish outlook for gold in 2012, citing “increases in liquidity by central banks and possible rises in inflation expectations”.
In a report published earlier, the lender said that it expects the precious metal to average USD1,775 a troy ounce in 2012 and USD2,150 in 2013.
However, the report added that “with high uncertainty likely to remain a major feature of the markets, gold could be vulnerable to further episodes of price correction.”
Gold prices have dropped nearly 15% since hitting a record high of USD1920 in early September. Despite the slump, prices are still 13% higher on the year, on track for its 11th consecutive annual gain.
Elsewhere on the Comex, silver for March delivery rose 0.65% to trade at USD29.72 a troy ounce, while copper for March delivery rallied 0.99% to trade at USD3.403 a pound.
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