Forexpros – Gold futures edged lower on Monday, retreating from a one-week high as fears over Spain’s fiscal outlook weighed on the euro and boosted the U.S. dollar, though prices remained supported by bouts of bargain buying.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,661.45 a troy ounce during early European morning trade, shedding 0.2%.
It earlier rose by as much as 0.4% to trade at USD1,671.85 a troy ounce, the highest since March 19.
Gold futures were likely to find support at USD1,627.75 a troy ounce, the low from March 22 and short-term resistance at USD1,682.75, the high from March 14.
Gold prices continued to take cues from the currency market, tracking movements in the euro. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
The single currency came under pressure, pulling back from a three-week high against the greenback, amid renewed concerns of further debt contagion in the euro zone after Spain’s ruling People’s Party did not secure an outright majority in an election win which could make it harder to push through harsh spending cuts.
The government is facing a national strike on Thursday, with the 2012 budget due to be presented on Friday.
Over the weekend, Italy’s Prime Minister Mario Monti warned that Spain could reignite the euro zone’s debt crisis if it doesn’t push ahead with austerity measures. That was echoed by the European Union’s senior economic official, Olli Rehn, who called on Spain to stick to its deficit targets.
Lingering concerns over the fiscal health of debt-laden euro zone members, Portugal and Italy also weighed on the single currency.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.25% to trade at 79.72.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
But prices remained support amid bouts of bargain buying from traders reluctant to bet that prices will fall further after prices fell to their lowest since January last week.
Meanwhile, gold traders continued to monitor developments surrounding a nationwide strike by bullion and jewelry dealers in India, which has led to muted demand on the physical market in New Delhi over the past week.
Indian jewelry and gold shops remained closed for a seventh day on Friday, extending the first nationwide strike in seven years in protest of a duty hike on unbranded jewelry and the doubling of an import duty on gold.
It is uncertain how long this impasse will continue. According to local traders, imports could decline by as much as 35% in 2012 from a record 969 tonnes a year earlier, while the industry might face more difficult time in coming days as marriage season begins.
India is the world’s top gold consumer.
Elsewhere on the Comex, silver for May delivery shed 0.4% to trade at USD32.15 a troy ounce, while copper for May delivery dipped 0.1% to trade at USD3.806 a pound.
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