Forexpros – Gold futures were modestly lower on Thursday, as investors awaited the outcome of the European Central Bank’s policy meeting later in the day amid growing uncertainty ahead of a critical two-day European Union summit.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,742.15 a troy ounce during early European morning trade, easing down 0.15%.
It earlier fell by as much as 0.35% to trade at a daily low of USD1,738.65 a troy ounce.
Gold futures were likely to find support at USD1,704.75 a troy ounce, the low of November 30 and resistance at USD1,767.05, the high of December 2.
European leaders were to begin a two-day summit to discuss proposed changes to EU treaties which would allow for greater fiscal integration and stricter enforcement of budgetary discipline in the single currency bloc.
But expectations for a breakthrough were dampened on Wednesday, after a senior German official expressed pessimism over the outcome of the summit.
Focus on the summit has intensified since ratings agency Standard & Poor’s placed 15 euro zone nations, including AAA-rated Germany and France, on review for credit downgrades due to the region’s deepening financial crisis.
Also Thursday, the European Central Bank was expected to cut interest rates by 0.25% at its policy meeting, a move which would take it back to a record-low 1%.
Investors will also be looking for any hint the ECB will boost its bond-buying program to support the region’s struggling periphery and help stabilize euro zone bond markets.
Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn’t offer investors any similar guaranteed payout.
Meanwhile, the Bombay Bullion Association said earlier that gold demand during India’s ongoing wedding-season has nearly disappeared as the precious metal’s local prices have climbed to near-record levels because of a steep fall in the value of the rupee.
“There is virtually no demand for gold,” said Prithviraj Kothari, president of the BBA.
India is the world’s largest gold consumer. November and December, the peak wedding season, usually see a surge in bullion purchases, as gifting jewelry made out of the precious metal to brides is a custom in India.
Elsewhere on the Comex, silver for March delivery dipped 0.05% to trade at USD32.61 a troy ounce, while copper for March delivery added 0.15% to trade at USD3.562 a pound.
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