Forexpros – Gold futures declined for the first time in five days on Friday, easing off a two-week high as prices came under pressure from a broadly stronger U.S. dollar and amid concerns that the euro zone’s debt crisis is deepening.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery settled at USD1,618.25 a troy ounce by close of trade on Friday, rising 3.21% over the week, the biggest weekly gain in a month.
Gold futures were likely to find support at USD1,597.75 a troy ounce, the low of January 5 and resistance at USD1,643.65, the high of December 21.
Gold prices rose to USD1,632.15 a troy ounce earlier Friday before turning lower as the U.S. dollar strengthened amid indications the U.S. economic recovery was gaining momentum.
The U.S. Department of Labor said nonfarm payrolls increased by 200,000 in December from a downwardly revised 100,000 the previous month and surpassing expectations for a 150,000 increase. The unemployment rate unexpectedly fell to 8.5%, the lowest level since February 2009.
The upbeat jobs data, combined with mounting fears over the euro zone’s debt crisis saw the U.S. dollar strengthen to a 16-month high against the euro.
Meanwhile, euro-denominated gold futures rallied to a three-week high of EUR1,279.10 a troy ounce, buoyed by broad weakness in the single currency.
Concerns over the region’s debt woes intensified on Thursday after France sold EUR4.02 billion of 10-year bonds in an auction which met with solid demand but at higher yields.
France is seen as vulnerable to losing its triple-A credit rating in the coming weeks, after it was put on negative watch by ratings agencies Standard & Poor’s and Fitch’s in December, amid concerns over the handling of the financial crisis in the euro zone.
The French auction came one day after an auction of German 10-year government debt which encountered lower than average investor demand.
Adding to fears over the region’s financial crisis, bank deposits at the European Central Bank’s overnight facility reached a new all-time high of EUR455 billion on Friday, underscoring the unwillingness of European lenders to lend to each other.
For much of 2011, investors’ typical reaction to bad news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal, but that relationship has unraveled in recent months, with investors piling in to the U.S. dollar as their safe haven of choice.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, settled at 81.61 on Friday, the highest since September 2010.
A stronger greenback usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Gold prices remained supported as some safe haven buying re-emerged amid mounting geopolitical tensions between Iran and the U.S.
Iran’s threat to close the strategic Strait of Hormuz boosted oil prices to the highest level since May on Thursday. Higher oil prices tend to benefit gold as it enhances its appeal as a hedge against oil-led inflation.
Elsewhere on the Comex, silver for March delivery settled at USD28.70 a troy ounce by close of trade on Friday, gaining 3.1% on the week, while copper for March delivery settled at USD3.431 a pound, easing down 0.1% over the week.
In the week ahead, investors will be closely watching a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel on Monday for any signs of progress in resolving the region’s two-year old debt crisis.
France, Greece, Germany, Italy and Spain are all scheduled to hold auctions of government debt, while the ECB is to hold its first policy-setting meeting of the New Year.
Forexpros
