Forexpros – Gold futures edged modestly higher on Thursday, as market participants awaited a Spanish government debt auction later in the day amid concerns the country will be the next euro zone member to seek an international bailout.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,644.85 a troy ounce during early European trade, gaining 0.32%.
It earlier rose by as much as 0.38% to trade at a session high USD1,645.25 a troy ounce.
Gold futures were likely to find support at USD1,613.55 a troy ounce, the low from April 4 and resistance at USD1,681.15, the high from April 12.
Spain was due to auction up to EUR2.5 billion of two and ten-year government bonds later in the day, as concerns mounted that Madrid will not be able to meet deficit reduction targets in the face of a looming recession.
Earlier the week, its 10-year government bond yield spiked above the crucial 6%-mark, raising fears the country will seek an international bailout.
Spanish 10-year yields traded at 5.82% in early pre-auction trade on Thursday.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.
Sentiment was hit on Wednesday after Spain’s central bank reported that the amount of bad loans at domestic banks rose to an 18-year high in February, underscoring fears over the health of the country’s banking sector.
Although gold’s appeal as a safe haven is usually boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent months.
A weakening euro and stronger dollar have weighed on gold instead.
Gold’s recent tight correlation with the euro leaves the precious metal vulnerable to a pull back should the euro zone’s debt crisis worsen as prices have been tracking movements in the euro in recent weeks.
Gold prices have been stuck in a narrow trading pattern in recent days, as investors search for the next catalyst to take prices higher.
Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the dollar and support gold.
Later Thursday, the U.S. was to release official data on unemployment claims, followed by industry data on existing home sales and a report on manufacturing activity in the Philadelphia area.
Investors will closely watch a policy meeting at the Federal Reserve next week, seeking cues on the central bank’s attitude towards monetary easing.
Elsewhere on the Comex, silver for May delivery rose 0.35% to trade at USD31.60 a troy ounce, while copper for May delivery added 0.5% to trade at USD3.648 a pound.
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