Forexpros – Gold futures erased gains on Thursday, retreating from the highest level in two-weeks as the U.S. dollar rallied to a 16-month high against the euro amid ongoing fears over the single currency bloc’s debt crisis.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,604.35 a troy ounce during early U.S. morning trade, dropping 0.5%.
It earlier fell by as much as 0.95% to trade at a session low USD1,597.75 a troy ounce.
Gold futures were likely to find support at USD1,572.65 a troy ounce, the low of January 3 and resistance at USD1,626.75, the daily high.
Gold’s losses came as the U.S. dollar strengthened to the highest level since September 2010 against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 1.05% to trade at 81.22, hovering below a 12-month high.
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.
The euro came under broad selling pressure following disappointing results at a closely watched auction of French government debt earlier in the day.
France sold EUR4.02 billion of 10-year bonds at an average yield of 3.29%, compared with 3.18% at a similar auction last month. Bids exceeded the amount sold 1.6 times, down sharply from a bid-to-cover ratio of 3.1 in December.
France is viewed as being at high risk of losing its triple-A sovereign credit rating in the coming weeks, fuelling concerns that the region’s ongoing debt crisis will worsen.
The broadly lower euro boosted euro-denominated gold futures to EUR1,251.60 a troy ounce, the highest since December 14.
Meanwhile, European lender HSBC Holdings lowered its average gold price forecast for 2012 by nearly 9% to USD1,850 a troy ounce, but remained bullish on the precious metal in the long-term.
“A poor global economic outlook and sovereign debt troubles will spur fresh demand for bullion as an alternative store of value,” the bank said in a report.
Gold prices rose to a two-week high during the Asian trading session as some safe haven buying re-emerged amid mounting geopolitical tensions between Iran and the West.
Elsewhere on the Comex, silver for March delivery fell 0.75% to trade at USD28.88 a troy ounce, while copper for March delivery tumbled 1.1% to trade at USD3.397 a pound.
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