Forexpros – Gold futures dropped again Friday as euro zone fears strengthened the safe haven appeal of the greenback despite heavy Chinese demand for the yellow metal.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1640.45 a troy ounce during mid U.S. trade falling 0.44%. It earlier hit a high of USD1651.05 and posted a low of 1635.75.
Gold futures were likely to find support at USD1631.05 a troy ounce and technical resistance exists at USD1681.55, the high of December 13th.
Strength in the U.S. dollar usually works to depress precious metal prices. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, advanced 0.22% to trade at 81.23. I
Interestingly, gold’s correlation with the euro/dollar exchange rate is at its most positive in nearly 2 years. This means that gold is more likely to move in synch with the euro than at any other time since January 2010.
The single currency fell against the U.S. dollar on the heels of a disappointing Italian debt auction dashing hopes of continued improvement from yesterday’s auction.
China imported the most gold ever from Hong Kong and investors bought U.S. bullion coins at the fastest pace in over two years.
Mainland China imported USD5.4 billion in gold and the U.S. mint sold 85,500 ounces of American Eagle gold coins during the first 12 days of January indicating strong demand for the precious metal.
Ross Norman or Sharps Pixley, Ltd told Bloomberg, “The thing that is on people’s minds is the massive increase in Chinese buying.”
Elsewhere on the Comex, silver for March settlement plunged 1.17% to trade at USD29.77 a troy ounce, while copper for March settlement gave back 0.53% to trade at USD3.63 a pound.
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