Forexpros – Gold futures edged lower during European morning hours on Tuesday, as investors preferred to turn to the relative safety of the U.S. dollar amid growing fears over the health of the global economy.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,585.05 a troy ounce during early European trade, dipping 0.25%.
The August contract traded in between a tight range of USD1,588.85 a troy ounce, the daily high and a session low of USD1,584.15 a troy ounce. Prices hit a one-week low of USD1,576.55 a troy ounce on July 6.
Gold futures were likely to find support at USD1,551.35 a troy ounce, the low from June 29 and near-term resistance at USD1,609.85, the high from July 6.
Fears over the global economic outlook intensified after official data showed that Chinese exports and imports in June slowed from the previous month, as weakening global demand weighed.
In a report, the Customs General Administration of China said the nation’s trade surplus widened to a three-year high of USD31.7 billion in June from USD18.7 billion in the previous month.
The report said that exports rose by 11.3% in June from a year earlier, slowing from 15.3% in May. Imports grew by 6.3%, significantly below expectations of 11.0% and slowing sharply from 12.7% in the previous month.
Normally a widening trade surplus is considered a good thing, but June’s result appeared more related to a weakness in imports, fuelling concerns over a slowdown in the world’s second largest economy.
Investors were looking ahead to Chinese economic data due out later this week, including second quarter growth figures, to gauge whether China is a heading towards a hard or a soft landing.
A deeper slowdown in China would impair a global expansion that is already faltering because of the ongoing debt crisis in the euro zone.
In the euro zone, a meeting of finance ministers from the region on Monday offered few signs of progress in tackling the region’s debt crisis.
Euro zone ministers agreed to push Spain’s deadline to reach its deficit reduction targets back to 2014 in exchange for further budget savings and set the parameters of an aid package for Madrid’s ailing banks.
The ministers made no apparent progress, however, on activating the bloc’s rescue funds to intervene in bond markets and bring down Spain and Italy’s spiraling borrowing costs.
Spain’s 10-year government bonds were hovering at 7.03% earlier Tuesday, above the 7% threshold which is widely seen as unsustainable.
The disappointing data prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the U.S. dollar.
The euro languished near a two-year low against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.15% to trade at 83.41.
Gold has lost some of its safe haven appeal to the dollar and U.S. Treasuries, partly as a strengthening dollar makes the metal less attractive to buyers holding other currencies.
Elsewhere on the Comex, silver for September delivery fell 0.8% to trade at USD27.21 a troy ounce, while copper for September delivery shed 0.65% to trade at USD3.410 a pound.
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