Forexpros – Gold futures rose for the first time in five days on Friday, rebounding from an 11-week low as the biggest weekly drop since September created bargain buying opportunities for investors.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery settled at USD1,601.15 a troy ounce by close of trade on Friday, plunging 6.7% over the week, the worst weekly loss since late September.
Gold futures were likely to find support at USD1,562.95 a troy ounce, the low of December 15 and an 11-week low and resistance at USD1,645.65, the high of December 15.
Gold futures gained 1.5% on Friday as prices found support amid bargain buying and as the U.S. dollar edged lower against its major counterparts, boosting the appeal of the precious metal.
French lender Credit Agricole said in a report Friday, “Gold took a beating this week and today bounced a bit as investors see this as a good moment to buy, but it is still vulnerable.”
According to the report, the lender expects gold prices to “stay under pressure as the funding stress in Europe is increasing the need for liquidity, and gold is seen as one of the assets to liquidate.”
Concerns that the euro zone’s debt crisis was deepening were likely to cap gains in the near-term. Fitch Ratings announced Friday that it lowered France’s rating outlook and put six other euro zone members on review for a downgrade, saying that a “comprehensive solution” to the euro-zone crisis is “technically and politically beyond reach.”
Despite the week’s sharp drop, gold prices are still 13% higher on the year, on track for its 11th consecutive annual gain.
Gold suffered heavy losses earlier in the week, as the U.S. dollar rallied to an 11-month high against the euro after a European Union agreement reached earlier in the month disappointed expectations for a comprehensive solution to resolve the region’s two-year-old debt crisis.
For much of the last year, investors’ typical reaction to downbeat news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal. But that relationship has unraveled recently, with traders preferring the relative safety of the U.S. dollar instead.
Gold prices plunged nearly 5% on Wednesday, dropping below key support levels to close below its 200-day-moving-average for the first time in nearly three years as investors sold profitable gold holdings to raise cash and cover losses in other asset classes.
Sentiment on the precious metal was also dampened after the Federal Reserve refrained from signaling another round of quantitative easing at its last monetary policy meeting of the year.
When the Fed announced the second round of quantitative easing, known as the QE2, in November last year, gold prices scored record highs for four consecutive sessions.
Elsewhere on the Comex, silver for March delivery settled at USD29.72 a troy ounce by close of trade on Friday, tumbling 7.75% on the week, while copper for March delivery settled at USD3.362 a pound, losing 5.8% over the week.
In the week ahead investors will be keeping a close watch on Tuesday’s report on German business climate, to assess the impact of the debt crisis on the region’s largest economy. Meanwhile, the U.S. is to release key reports on the housing sector, durable goods and jobless claims.
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