Forexpros – Gold futures edged higher on Tuesday, trading above the psychologically-important USD1,600-an-ounce level as prices were boosted by a broadly weaker U.S. dollar.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,602.75 a troy ounce during early European morning trade, gaining 0.38%.
It earlier rose by as much as 0.55% to trade at a daily high of USD1,603.35 a troy ounce.
Gold futures were likely to find short-term support at USD1,577.45 a troy ounce, the low of December 16 and resistance at USD1,645.65, the high of December 14.
Gold’s gains came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, declined 0.2% to trade at 80.79.
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.
However, gains were limited amid ongoing concerns over the euro zone’s debt crisis after finance ministers from the single currency bloc agreed to provide EUR150 billion in loans to the International Monetary Fund, below the EUR200 billion initially agreed upon at an EU summit earlier in the month.
Furthermore, European Central Bank President Mario Draghi reiterated that the bank’s bond purchasing program was temporary and “not infinite” and said the euro zone economy was likely to enter a recession by early next year.
Later in the day, Spain was due to auction three- and six-month government bonds, in what was being viewed as a key test of market confidence in the country’s government debt.
Trading volumes were light during Asian trade, with many traders having closed their books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Europe’s biggest bank HSBC Holdings said in a report Monday that, “year-end book-squaring by institutions and profit-taking by hedge funds at the end of a difficult year may be weighing on gold, with potential buyers also reluctant to step in.”
Elsewhere on the Comex, silver for March delivery rose 0.65% to trade at USD29.06 a troy ounce, while copper for March delivery eased up 0.1% to trade at USD3.311 a pound.
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