Forexpros – Gold futures extended sharp gains on Tuesday, trading at the highest level since mid-December as the euro’s advance against the U.S. dollar boosted the appeal of precious metals.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,637.15 a troy ounce during U.S. morning trade, rallying 1.8%.
It earlier rose by as much as 1.98% to trade at USD1,641.15 a troy ounce, the highest since December 21.
Gold futures were likely to find support at USD1,606.05 a troy ounce, the previous day’s low and short-term resistance at USD1,645.65, the high of December 14.
Gold extended gains after prices rose above their 200-day moving average. Market participants said that fresh buy orders were triggered once prices rose above the key USD1,634 an ounce level.
The precious metal closed below its 200-day moving average for the first time in nearly three years on December 15.
Meanwhile, prices found additional support as the euro pulled further away from last week’s 16-month trough against the greenback.
Gold’s correlation with the euro/dollar exchange rate is at its most positive in nearly two years, meaning gold prices are more likely to move in synch with the euro than at any other time since January 2010.
The euro’s gains came after ratings agency Fitch said that France, the euro zone’s second largest economy, would not be downgraded in 2012.
Markets were looking forward to a meeting between German Chancellor Angela Merkel and International Monetary Fund President Christine Lagarde later Tuesday in order to discuss Greece’s bailout package.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, declined 0.27% to trade at 81.08.
Dollar weakness usually benefits gold, as it boosts the metal’s appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Elsewhere on the Comex, silver for March delivery surged 4.35% to trade at a one-month high of USD30.04 a troy ounce, while copper for March delivery rose 2.8% to trade at USD3.511 a pound.
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