Forexpros – Gold futures were higher during European morning trade on Monday, as news that euro zone finance officials agreed to bailout Spain in order to help its ailing banking sector boosted the euro and weighed heavily on the U.S. dollar.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,599.15 a troy ounce during early European trade, gaining 0.5%.
It earlier rose by as much as 0.75% to trade at a two-day high of USD1,609.25 a troy ounce. Prices touched USD1,642.15 on June 6, the highest since May 7.
Gold futures were likely to find support at USD1,546.35 a troy ounce, the low from June 1 and resistance at USD1,642.15, the high from June 6.
Spain became the fourth euro-zone country to require international financial assistance on Saturday, as Finance Minister Luis de Guindos said the EU will grant Spain a loan of up to EUR100 billion that the government will use to recapitalize the country’s ailing banking sector.
Finance ministers from the euro zone welcomed the move, saying the sum “must cover estimated capital requirements with an additional safety margin.”
The amount sought is about 2.7 times the funds deemed necessary for Spanish banks by the International Monetary Fund in a report released June 8.
Spanish Prime Minister Mariano Rajoy on Sunday expressed hope that the bailout would help the country’s ailing economy, but he warned against expecting a quick turnaround following the banking rescue.
Concerns about Spain’s banks have grown since Bankia, the country’s fourth-largest lender, said last month it needed EUR19 billion in state aid to shore itself up against bad loans.
Spain is the fourth euro nation to seek a rescue, after Greece, Portugal and Ireland. A financial crisis has gripped Spain since 2008, when a real estate bust caused big losses for many banks.
The Spanish bailout news provided an immediate spark to risk appetite, prompting investors to move out of the U.S. dollar.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.7% to trade at 82.33.
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.
The next key date for the single currency union is Sunday, June 17 when Greek voters head to the polls in an election likely to determine whether the debt-laden country will remain in the euro zone.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent months.
A weakening euro and stronger dollar have weighed on gold instead, as the precious metal has been moving in tandem with riskier assets since hitting a record high of USD1,920 last September.
Gold has lost its safe haven appeal to the dollar, U.S. Treasuries and German Bunds, partly as a strengthening dollar makes the metal less attractive to buyers holding other currencies.
Elsewhere on the Comex, silver for July delivery rose 0.9% to trade at USD28.73 a troy ounce, while copper for July delivery surged 2% to trade at USD3.350 a pound.
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