Forexpros – Gold futures declined for the fourth consecutive day on Tuesday, as the U.S. dollar strengthened after ratings agency Moody’s downgraded the credit ratings on six European countries, including Spain and Italy, while markets continued to eye developments surrounding Greece.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,717.85 a troy ounce during early European morning trade, shedding 0.41%.
It earlier fell by as much as 0.48% to trade at a session low of USD1,716.85 a troy ounce, which was also the lowest since February 10, when prices fell to a two-week low.
Futures were likely to find support at USD1,706.85 a troy ounce, the low of February 10 and resistance at USD1,735.25, Monday’s high.
Market sentiment took a hit following an announcement from Moody’s late Monday that it downgraded its credit ratings on Italy, Portugal and Spain. France and Austria kept their top ratings but had their outlooks dropped to “negative” from “stable.”
Moody’s also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta, while warning that it could downgrade the U.K., rekindling contagion worries.
The ratings firm’s actions follow similar moves by Standard & Poor’s and Fitch Ratings last month where multiple downgrades were made all at once.
Moody’s also noted the fragility of financial markets in Europe and the possibilities of future shocks to the system because of the crisis.
Meanwhile, investors continued to monitor developments surrounding Greece. The debt-laden country’s parliament approved a set of spending and wage cuts needed to secure the country’s EUR130 billion bailout package and avoid a sovereign debt default.
Attention now shifts to a meeting Wednesday of euro zone finance ministers, who will discuss the approval of the debt-laden country’s second bailout before a March 20 deadline.
Greece has a EUR14.5 billion bond repayment due on March 20 and requires the bailout funding in order to be able to make that payment and avoid a messy default.
The news prompted investors to shun riskier assets, boosting demand for the safe-haven U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.28% to trade at 79.29.
Gold is priced in U.S. dollars and when the greenback strengthens, the dollar-priced commodity becomes more expensive to investors who use other currencies.
Although gold is often seen as a safe haven during times of economic uncertainty, the increasingly grave debt crisis in the euro zone has done little to buoy appetite in gold recently.
A weakening euro and stronger dollar have weighed on gold instead.
Elsewhere on the Comex, silver for March delivery fell 0.97% to trade at USD33.39 a troy ounce, while copper for March delivery slumped 0.4% to trade at USD3.824 a pound.
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