Forexpros – Gold futures extended losses on Tuesday, hovering close to the key support level of USD1,700-an-ounce as a Standard & Poor’s downgrade warning of the European Financial Stability Facility prompted investors to sell profitable gold positions to raise cash.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,708.45 a troy ounce during U.S. morning trade, tumbling 1.5%.
It earlier fell by as much as 1.7% to trade at USD1,706.05 a troy ounce, the lowest price since November 30.
Gold futures were likely to find short-term support at USD1,700.50 a troy ounce, the low of November 30 and resistance at USD1,762.95, the high of December 2.
S&P said earlier that it placed the EFSF’s, the euro zone’s bailout fund, long-term triple-A ratings on watch, adding that the fund’s long-term rating may be cut by 1 or 2 notches on review.
“Depending on the outcome of our review of the ratings on EFSF member governments, we could lower the long-term rating on the EFSF by one or two notches, if any,” S&P said in a statement released earlier.
The warning comes a day after the ratings agency warned it may downgrade the ratings of 15 euro zone countries, included AAA-rated Germany and France within 90 days, depending on the outcome of Friday’s critical European Union summit.
Earlier Tuesday, German Chancellor Angela Merkel said European Union leaders will take important decisions to stabilize the euro zone at a summit later this week, brushing off S&P’s warning.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent weeks.
Instead, gold futures have moved largely in line with other commodities and risk-sensitive assets.
Despite the sharp decline, Wall Street investment bank Morgan Stanley expects gold to remain supported ahead of the European Central Bank’s policy meeting on Thursday, saying an anticipated interest rate cut could boost liquidity and hence demand for the yellow metal.
The ECB is expected to cut its benchmark interest rate for the second consecutive month, a move that would take it back to a record low of 1.0%.
Elsewhere on the Comex, silver for March delivery tumbled 1.9% to trade at USD31.76 a troy ounce, while copper for March delivery sank 1.75% to trade at USD3.552 a pound.
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