Forexpros – Gold futures erased losses in choppy trade on Monday, as the euro turned higher against the U.S. dollar after the first stage of a two-part auction to settle credit default swap contracts written on Greek government debt was successfully completed.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,664.95 a troy ounce during U.S. morning trade, gaining 0.54%.
It earlier rose by as much as 0.65% to trade at USD1,666.75 a troy ounce, the highest since March 14.
Gold futures were likely to find support at USD1,634.75 a troy ounce, the low from March 14 and short-term resistance at USD1,682.75, the high from March 14.
Gold prices took cues from the currency market on Monday, 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 turned higher against the U.S. dollar, rising above 1.32 after the first stage of a two-part auction to settle credit default swap contracts written on Greek government debt was successfully completed.
Holders of nearly USD3.2 billion in Greek CDS will likely receive around USD2.5 billion in compensation for the country’s debt restructuring.
The CDS contracts were triggered after the Greek government earlier this month activated clauses forcing all private bondholders to participate in a debt swap that cut the nominal value of Greek debt holdings by 53.5%, resulting in the declaration of a “credit event” by the International Swaps and Derivatives Association.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, fell 0.28% to trade at 79.85, reversing an earlier gain of as much as 0.2%.
Meanwhile, prices continued to draw support from bouts of bargain hunting and technical buying after futures dropped 3.15% last week, the second biggest weekly decline of 2012.
Gold prices have been under pressure in recent weeks as investors unwound long positions after the Federal Reserve gave an upbeat assessment of the U.S. economy, which reduced expectations for a third round of U.S. monetary easing by the central bank.
Gold has fallen around 8% since late February and are about 14% below the all-time high of USD1,920 per ounce hit in September.
New York Federal Reserve President William Dudley said earlier that recent economic data indicated that the economic recovery may be gaining traction, but said that the bank would continue to be guided by data when making future monetary policy decisions.
Gold futures were lower during the Asian trading session after India’s proposed plan to double the import duty on gold led to muted action on the physical market.
India’s customs duty on gold rose 4%, Finance Minister Pranab Mukherjee announced Friday, in a move aimed at helping the government to keep its current-account deficit under control.
India is the world’s top gold consumer. The duty hike may lead to a drop in demand for the precious metal.
Elsewhere on the Comex, silver for May delivery jumped 1.1% to trade at USD32.95 a troy ounce, while copper for May delivery rose 0.85% to trade at USD3.911 a pound.
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