Forexpros – Gold futures moved lower during early U.S. trade on Wednesday, as growing concerns over the euro zone’s sovereign debt crisis weighed on the single currency and pushed the U.S. dollar higher, weighing on dollar-denominated commodities.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,642.25 a troy ounce during early U.S. morning trade, shedding 0.55%.
It earlier fell by as much as 0.7% to trade at a session low of USD1,638.75 a troy ounce, holding just above Tuesday’s one-week low of USD1,635.45 an 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.
Gold traders looked to the currency market for price direction, as prices have been tracking movements in the euro in recent weeks.
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.
Sentiment on the single currency remained under pressure ahead of a critical auction of two and 10-year Spanish government bonds on Thursday, amid concerns the country will be the next euro zone member to seek an international bailout.
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.
In addition, concerns over Spain’s troubled banking sector mounted after the country’s central bank reported that the amount of bad loans at domestic banks rose to an 18-year high in February.
Meanwhile, worries over Portugal’s economic health intensified after Prime Minister Pedro Passos Coelho said Wednesday there were “no guarantees” that the country would meet its commitment to return to the international capital markets before September 2013.
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.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.32% to trade at 79.95.
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.
Gold prices have been stuck in a narrow trading pattern in recent days, as investors search for the next catalyst to take prices higher.
Investors will closely watch a policy meeting at the Federal Reserve next week, seeking cues on the central bank’s attitude towards monetary easing. Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
Elsewhere on the Comex, silver for May delivery shed 0.6% to trade at USD31.48 a troy ounce, while copper for May delivery slumped 0.75% to trade at USD3.619 a pound.
Forexpros
