Forexpros – Gold futures declined on Thursday, giving back most of the previous day’s gains as growing fears over a potential Greek debt default prompted investors to flock to the perceived safety of the U.S. dollar.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,716.95 a troy ounce during early European morning trade, shedding 0.65%.
It earlier fell by as much as 0.84% to trade at a two-day low of USD1,715.55 a troy ounce.
Futures were likely to find short-term support at USD1,713.95 a troy ounce, the low from February 14 and resistance at USD1,739.15, Wednesday’s high and the highest since February 9.
Concerns over a Greek debt default escalated after reports emerged on Wednesday that European Union officials were looking at ways to delay the second Greek bailout until after general elections in April.
A three-hour teleconference call between euro zone finance ministers Wednesday failed to resolve all the issues surrounding a second aid package for Athens, putting off any decision on the matter until Monday at the earliest.
Without a bailout, Greece faces the threat of defaulting when a EUR14.5 billion bond redemption comes due on March 20.
Also weighing on sentiment, Moody’s said Wednesday it was placing over 100 financial firms across the world on ratings review due to the euro zone crisis.
Ratings for heavyweight lenders UBS, Credit Suisse and Morgan Stanley may be lowered by as many as three levels, while those for Goldman Sachs, Deutsche Bank, JPMorgan Chase and Citigroup may be cut by two levels, Moody’s said in a statement.
The news prompted investors to move in to the relative safety of the U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.45% to trade at 80.10, the highest since January 25.
The dollar found further support after the minutes of the Federal Reserve’s January policy meeting showed that policymakers were divided about whether to launch fresh easing measures to shore up growth, but were still actively considering such a move.
Gold is priced in U.S. dollars and when the greenback strengthens, the dollar-priced commodity becomes more expensive to investors who use other currencies.
Although gold is often seen as a safe haven during times of economic uncertainty, the increasingly grave debt crisis in the euro zone has done little to buoy appetite in gold recently. A weakening euro and stronger dollar have weighed on gold instead.
Some traders also sold profitable gold positions to offset losses in other markets, while others pulled cash out of broader markets on concerns of a sharper downturn.
Elsewhere on the Comex, silver for March delivery slumped 1.05% to trade at USD33.06 a troy ounce, while copper for March delivery tumbled 1.53% to trade at USD3.744 a pound.
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