Forexpros – Gold futures declined in year-end trade conditions on Wednesday, falling further below the key USD1,600-an-ounce level as most traders already closed books for the year and moved to the sidelines, waiting for a fresh start in January.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,588.75 a troy ounce during early European morning trade, shedding 0.42%.
It earlier fell by as much as 0.5% to trade at USD1,587.75 a troy ounce, the lowest since December 19.
Gold futures were likely to find short-term support at USD1,577.45 a troy ounce, the low of December 16 and resistance at USD1,605.85, the previous day’s high.
Trading volumes are expected to remain thin following the Christmas break and the run up to the end of the year holiday, resulting in low liquidity and irregular volatility.
Italy was scheduled to sell EUR9 billion of 179-day bills and EUR2.5 billion of zero-coupon 2013 securities later in the day. The country will also auction EUR8.5 billion of debt due in 2014, 2018, 2021 and 2022 on Thursday.
The response to the auction will be a gauge of whether distressed government bonds will be purchased by European banks after the European Central Bank’s cash infusion last week.
Ahead of the auctions, the yield on Italy’s ten-year bonds hovered close to the 7% threshold, a level widely considered unsustainable in the long-term.
For much of 2011, investors’ typical reaction to bad news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal, but that relationship has unraveled recently.
Gold has been pressured in recent months, with its safe haven appeal waning as investors prefer the U.S. dollar as their safe haven of choice amid Europe’s deepening sovereign debt crisis.
Year-end selling by hedge funds and tight liquidity in European interbank money markets have also contributed to recent price falls.
Prices have tumbled nearly 15% since hitting a record high of USD1920 in early September. Despite the slump, prices are still 13% higher on the year, on track for its 11th consecutive annual gain.
Elsewhere on the Comex, silver for March delivery shed 0.25% to trade at USD28.67 a troy ounce, while copper for March delivery added 0.25% to trade at USD3.418 a pound.
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