Forexpros – Gold futures extended losses in thin post-holiday trade on Wednesday, falling to a two-week low as investors were reluctant to open new positions before the new year amid lingering concerns over the euro zone’s debt crisis.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,571.45 a troy ounce during U.S. morning trade, tumbling 1.5%.
It earlier fell by as much as 1.55% to trade at USD1,571.15 a troy ounce, the lowest since December 15.
Gold futures were likely to find short-term support at USD1,562.95 a troy ounce, the low of December 15 and resistance at USD1,605.85, the previous day’s high.
With most investors already away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 billion of two-year zero-coupons at a 5% yield.
Following the auction, the yield on Italy’s 10-year bonds eased below the 7% threshold widely seen as unsustainable in the long-term before creeping back higher.
Despite the upbeat results, Thursday’s sale of EUR8.5 billion of long-term Italian debt maturing between 2014 and 2022 was seen as a bigger test of market confidence in the country’s sovereign debt.
Adding to concerns, data released earlier showed that the use of the European Central Bank’s overnight deposit facility reached a new, all-time high of EUR452.03 billion on Tuesday.
The figure topped the previous record of EUR411.8 billion set on Tuesday. Heavy use of the deposit facility is seen as a sign of stress in the banking system, reflecting reluctance by banks to lend to each other.
The report added to speculation that the central bank’s three-year loan operation last week did little to strengthen the region’s banking sector.
Gold has been pressured in recent months, with its safe haven appeal waning as investors prefer the U.S. dollar as their safe haven of choice amid Europe’s deepening sovereign debt crisis.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.8% to trade at 80.78.
Year-end selling by hedge funds and tight liquidity in European interbank money markets have also contributed to recent price falls.
Prices have tumbled nearly 18% since hitting a record high of USD1920 in early September. Despite the slump, prices are still 11% higher on the year, on track for its 11th consecutive annual gain.
Elsewhere on the Comex, silver for March delivery plunged 4.45% to trade at a three-month low of USD27.46 a troy ounce, while copper for March delivery shed 0.5% to trade at USD3.392 a pound.
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