Forexpros – Gold futures regained strength on Tuesday, rising for the first time in three days as a broadly weaker U.S. dollar boosted the appeal of the precious metal while investors waited for a second liquidity injection from the European Central Bank before opening fresh positions.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,777.15 a troy ounce during early European morning trade, gaining 0.54%.
It earlier rose by as much as 0.6% to trade at a daily high of USD1,778.55 a troy ounce.
Futures were likely to find support at USD1,763.25 a troy ounce, Monday’s low and resistance at USD1,788.85, February 23’s high and the highest since mid-November.
Gold prices moved higher in tandem with the euro on Tuesday, as sentiment improved after German lawmakers approved a second Greek bailout.
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.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.34% to trade at 78.36.
However, the single currency remains vulnerable to a pullback after ratings agency Standard & Poor’s cut Greece’s ratings to ‘selective default’, following the government’s decision to add “collective action clauses” to its bonds.
Prices were underpinned as investors eyed the launch of a second liquidity operation by the European Central Bank later in the week.
The ECB’s second three-year long-term refinancing operation, known as an LTRO, is scheduled for February 29 and could total nearly EUR500 billion, according to market analysts.
Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies and boost inflation.
Further improving sentiment on the precious metal, data from the International Monetary Fund showed that the central bank’s of Kazakhstan, Turkey and Belarus added to their gold holdings last month.
Global central banks have been buying gold in reaction to the sovereign debt crises in the euro zone, affecting traditional reserve currencies, like the U.S. dollar and the euro.
The World Gold Council said in its quarterly Gold Demand Trends report published earlier in February that central bank buying hit the highest level in at least 40 years in 2011.
Elsewhere on the Comex, silver for May delivery rose 0.45% to trade at USD35.77 a troy ounce, while copper for May delivery gained 0.55% to trade at USD3.910 a pound.
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