Forexpros – Gold futures extended losses from the previous session during European morning trade on Wednesday, dropping to a four-day low as investors piled in to the relative safety of the U.S. dollar amid mounting concerns Greece may exit the euro zone.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,559.55 a troy ounce during early European trade, tumbling 1.1%.
It earlier fell by as much as 1.35% to trade at USD1,555.15 a troy ounce, the lowest since May 17. Prices touched USD1,598.95 a troy ounce on May 21.
Gold futures were likely to find support at USD1,542.85 a troy ounce, the low from May 17 and near-term resistance at USD1,598.95, the high from May 21.
Market sentiment was rattled after former Greek Prime Minister Lucas Papademos said that the debt-laden country had no choice but to stick with a painful austerity program or face a damaging exit from the euro zone.
Papademos also warned that preparations for a Greek exit were being considered.
Meanwhile, investors eyed a meeting of European leaders later in the day, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
President Hollande was expected to propose the introduction of joint euro bonds at the summit, but Germany has repeatedly resisted the idea, arguing they would lessen pressure for heavily indebted countries to get their finances in order.
A failure to make headway risks jolting markets further, analysts said.
The ongoing Greece fears weighed heavily on the euro, which traded a breath away from a four-month low, and also within sight of a 21-month low. The dollar index, meanwhile hit its highest level since September 2010 earlier in the session.
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 months.
A weakening euro and stronger dollar have weighed on gold instead, as the precious metal has been moving in tandem with riskier assets since hitting a record high of USD1,920 last September.
Meanwhile, technical traders noted of “bearish” chart signals, after the market failed to break above the key resistance level of USD1,600-an-ounce earlier in the week. Prices closed below their 14-day moving average on Tuesday.
Elsewhere on the Comex, silver for July delivery retreated 1.3% to trade at USD27.81 a troy ounce, while copper for July delivery dropped 1.15% to trade at USD3.447 a pound.
Forexpros
