Forexpros – Gold futures held on to losses during U.S. morning trade on Wednesday, but came off the lowest levels of the day as the U.S. dollar weakened ahead of the release of the minutes of the most recent Federal Reserve policy meeting.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,542.15 a troy ounce during early U.S. trade, dropping 0.95%.
It earlier fell by as much as 1.95% to trade at USD1,526.95 a troy ounce, the lowest since December 29, 2011.
Gold futures were likely to find support at USD1,510.45 a troy ounce, the low from July 6, 2011 and resistance at USD1,585.65, the high from May 14.
Gold prices recovered as markets looked ahead to the release of the minutes of the April meeting of the Federal Reserve’s Open Market Committee.
At that meeting, Fed Chairman Ben Bernanke left open the possibility of further asset purchases to support the U.S. economy. Chairman Bernanke said that the Fed’s “intention is to maintain highly accommodative stance of policy for the foreseeable future.”
Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
Gold futures were down heavily earlier during Asian and European trading hours, falling to a fresh 2012 low, as investors continued to pile in to the U.S. dollar amid growing concerns over political turmoil in Greece.
Gold futures have been on a rapid decline since the outcome of the May 6 elections in Greece threw the future of the country’s international bailout deal into doubt and fuelled fears over a possible Greek exit from the euro zone.
Speculation over the possibility of a Greek exit from the euro zone intensified on Tuesday, as talks aimed at forming a coalition government failed.
A caretaker government will be appointed later Wednesday, with new elections likely in early June, fuelling fears over a potential Greek default and eventual exit from the euro zone.
Reports that Greeks have withdrawn as much as EUR700 million from the nation’s banks since the outcome of the elections further added to the gloomy environment.
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. A weakening euro and stronger dollar have weighed on gold instead.
According to market participants, gold prices could come under further selling pressure in the near-future, amid an uncertain technical picture. Technical traders expect the next level of support for gold to be at USD1,523 and then USD1,510 after breaking below key support levels last week.
Some traders noted that heavy losses in stocks and other commodities markets accelerated gold’s sell-off, as traders were forced to sell their gold holdings to raise cash to cover losses elsewhere.
Money managers in gold futures and options cut their net long positions by 20% to the lowest level since December 2008, as investors aggressively unwound their bullish bets in the precious metal after a sharp price pullback.
In October 2008, gold prices tumbled 18% as turmoil in global financial markets led to losses in global equity and commodity markets. The precious metal rallied 23% in the next two months.
Elsewhere on the Comex, silver for July delivery dropped 2.1% to trade at USD27.48 a troy ounce, while copper for July delivery fell 1% to trade at USD3.482 a pound.