Forexpros – Gold futures eased off the lowest level since late September on Thursday, as weakness in the U.S. dollar underlined prices however gains were limited as investors remained jittery about the euro zone’s debt crisis and amid the year-end rush to liquidate profitable positions.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,589.65 a troy ounce during U.S. morning trade, edging 0.25% higher.
It earlier rose by as much as 0.5% to trade at a daily high of USD1,596.45 a troy ounce.
Gold futures were likely to find long-term support at USD1,533.35 a troy ounce, the low of September 26 and resistance at USD1,645.65, the previous day’s high.
Gold’s gains came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.3% to trade at 81.00.
Risk sentiment recovered after the U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits last week fell to 366,000, the lowest since May 2008.
Claims have fallen below 400,000, a level historically associated with an improving labor market, in five of the past six weeks.
A separate report showed that the New York Federal Reserve’s index of manufacturing conditions jumped to a seven-month high of 9.5 in December, up from a reading of 0.6 the previous month.
A well-received Spanish bond auction also contributed to the improvement in sentiment. The country’s Treasury sold EUR6 billion of medium-and-long-term bonds earlier, far surpassing a target of EUR3.5 billion.
The country sold EUR2.5 billion of five-year bonds at an average yield of 4.02%, down sharply from 5.27% at a similar auction last month. Spain also auctioned EUR1.4 billion of 10-year bonds at a yield of 5.54%, compared to 6.97% last month.
However, concerns over the euro zone’s debt crisis remained after the European Central Bank’s monthly report said the region’s debt crisis still posed a substantial threat to the economic outlook.
For much of the last year, investors’ typical reaction to downbeat news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal.
But since hitting a record above USD1920 in September, the precious metal has switched from a negative to a positive correlation with risk-sensitive assets, such as stocks and industrial commodities, with investors preferring the U.S. dollar as their safe haven of choice.
Gold prices plunged nearly 5% on Wednesday, dropping below the key support level of USD1,600 as lingering concerns over a possible mass downgrade in the euro zone sparked a rush to the U.S. dollar.
Prices are prone to volatile moves at the end of the year on thinning liquidity as many have closed their books for the year and moved to the sidelines of the market, waiting for a fresh start in January.
Gold futures have lost nearly 11% in the past two weeks, as investors sold the precious metal to raise cash and cover losses elsewhere. Despite the slump, gold prices are still 10% higher on the year, on track for its 11th consecutive annual gain.
Elsewhere on the Comex, silver for March delivery fell 0.7% to trade at USD28.72 a troy ounce, while copper for March delivery rose 0.3% to trade at USD3.288 a pound.
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