Forexpros – Gold prices dipped in Asian trading Tuesday after weak U.S. manufacturing data sent investors buying the precious metal’s traditional hedge, the dollar, as a safety play.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded down 0.12% at USD1,595.85 a troy ounce.
Gold hit a low of USD1,595.35 a troy ounce and a high of USD1,597.95 a troy ounce early during the session.
Gold futures were likely to test support at USD1,587.65 a troy ounce, the low from July 2, and resistance at USD1,602.85, the high from July 2.
Earlier in the U.S., the Institute for Supply Management reported that its index of manufacturing activity fell to 49.7 in June from 53.5 in May.
New orders dropped to 47.8 from 60.1, while the employment gauge fell to 56.6 from 56.9.
On the index, a reading above 50.0 indicates industry expansion, while below indicates contraction.
June’s figure was the lowest reading since July 2009 and well below analyst forecasts for the index to slip down to 52.0.
The news sent the dollar rising, as investors sold stocks and snapped up position in the safe-haven currency to await better data to encourage riskier investments.
However, poor manufacturing data also sparked talk of Federal Reserve intervention in the U.S. economy via quantitative easing, large-scale bond buybacks from banks.
Quantitative easing weakens the dollar in exchange for more robust economic activity, talk of such policies sent some investors selling greenbacks, which curbed gold’s losses.
Meanwhile in Europe, the eurozone unemployment rate rose to a record high 11.1% in May from 11.0% in April, which further pressured the commodity down as did talk that some eurozone nations oppose European Union proposals to fight the debt crisis, which fueled more dollar demand.
E.U. leaders recently voted to give the European Stability Mechanism, a bailout fund, approval to recapitalize banks as well as the green light to buy government bonds to ease credit conditions in troubled countries, the latter measure drawing criticism from Finland and the Netherlands.
Elsewhere on the Comex, silver for September delivery was down 0.07% and trading at USD27.480 a troy ounce, while copper for September delivery was down 0.02% and trading at USD3.468 a pound.
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