Forexpros – Gold futures extended earlier gains to rise to a two-day high on Wednesday, as some safe haven buying re-emerged amid growing uncertainty ahead of a critical European Union summit.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,739.55 a troy ounce during early U.S. morning trade, climbing 0.45%.
It earlier rose by as much as 0.6% to trade at USD1,742.65 a troy ounce, the highest since December 5.
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.
Gold’s safe haven appeal re-emerged after the Wall Street Journal reported that an unnamed senior German official expressed pessimism on the prospect of success at the two-day EU summit, scheduled to begin Thursday.
European leaders are 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.
European officials are also reported to be negotiating an increase in the bloc’s bailout fund, the European Financial Stability Facility and the permanent structure that will replace it, the European Stability Mechanism.
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.
Gold is often considered a haven during times of financial turmoil, but for the past two months, the precious metal has risen and fallen in line with riskier assets, such as stocks and industrial commodities.
But that correlation finally unraveled, as gold futures rose along with the U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.15% to trade at 78.75.
Prices found additional support from speculation that the European Central Bank may cut interest rates by 0.25% to 1% at it policy-setting meeting on Thursday.
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.
Elsewhere on the Comex, silver for March delivery shed 0.4% to trade at USD32.60 a troy ounce, while copper for March delivery tumbled 1.1% to trade at USD3.536 a pound.
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