Forexpros – Gold futures edged higher on Monday, as the U.S. dollar weakened ahead of a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy later in the day, while strong physical demand in Asia provided further support.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,623.35 a troy ounce during early European morning trade, gaining 0.4%.
It earlier rose by as much as 0.48% to trade at a session high USD1,624.05 a troy ounce.
Gold futures were likely to find support at USD1,597.75 a troy ounce, the low of January 5 and resistance at USD1,643.65, the high of December 21.
Gold’s gains came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, declined 0.2% to trade at 81.61, easing off a 16-month high.
Markets were looking forward to a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy later Monday in order to discuss proposals to increase fiscal coordination in the single currency bloc.
Sentiment remained on the back foot amid concerns over rising borrowing costs in the euro zone, as markets looked ahead to government debt auctions by Spain and Italy later in the week.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations, including France, Spain and Italy, to fund themselves.
Markets were also jittery after German magazine Der Spiegel reported on Saturday the International Monetary Fund was losing confidence in Greece’s ability to shore up its public finances and work off its mountain of debt.
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 in recent months, with gold trading in synch with other risk-sensitive assets.
Meanwhile, gold demand in the world’s second largest consumer China was expected to pick up ahead of the Lunar New Year, which falls on January 23, in China and elsewhere across Asia.
Elsewhere on the Comex, silver for March delivery jumped 1.2% to trade at USD29.02 a troy ounce, while copper for March delivery shed 0.2% to trade at USD3.428 a pound.
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