Forexpros – Gold futures were down for a third day on Tuesday, as ongoing concerns over Greece’s sovereign debt woes pushed the U.S. dollar higher against the euro, weighing on dollar-denominated commodities.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,699.35 a troy ounce during early European morning trade, shedding 0.26%.
It earlier fell by as much as 0.35% to trade at a session low USD1,698.15 a troy ounce.
Gold futures were likely to find support at USD1,689.95 a troy ounce, the low from February 29 and resistance at USD1,717.65, the previous day’s high.
Gold’s losses came as the U.S. dollar strengthened against the euro, rising close to a two-week high. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.19% to trade at 79.57, just off Monday’s two-week high of 79.64.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The euro came under pressure as markets remained jittery ahead of the March 8 deadline for bondholders to join the agreement under which they will exchange their existing Greek government bonds for new paper in a swap deal.
There is uncertainty over how much participation Greece will see for its bond swap. At least 66% of private sector bondholders must be willing to participate in the deal.
A failure to agree on the swap would put the country back on the brink of a messy sovereign debt default.
Meanwhile, market participants noted that gold prices remain vulnerable to a further pullback in the short-term, should prices drop below a key technical support level close to USD1,675 an ounce.
Gold has held its 200-day-moving average, currently at USD1,675 an ounce, since mid-January. Should it slip below that level, analysts said the metal could test USD1,650.
While last week’s drop damaged the near-term technical outlook for the precious metal, many knowledgeable market analysts expect prices to recover in the long-term.
Wall Street bank Citigroup said in a report earlier that it sees gold prices surging towards USD2,400 an ounce by the end of 2012, with prices eventually hitting USD3,400 an ounce in “the coming years”.
However, the bank warned of price weakness in the short term and said there is a “real danger” that there may be a correction to USD1,600 an ounce.
Elsewhere on the Comex, silver for May delivery eased up 0.15% to trade at USD33.74 a troy ounce, while copper for May delivery dropped 0.83% to trade at USD3.828 a pound.