Forexpros – Gold futures traded higher during U.S. afternoon trade Monday, as the euro dropped against the U.S. dollar after the initial pop higher due to Spanish bail out news being met with the reality of how the bailout will actually work.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,596.25 a troy ounce during U.S. afternoon trade, adding 0.30%.
It earlier climbed 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.
Monday’s turnaround coincided with the euro trimming its gains against the U.S. dollar. Gold’s recent tight correlation with the euro means the gyrations in the single currency are exerting a greater impact on bullion than its traditional safe-haven appeal.
The single currency rallied to a three-week high earlier after Spain’s Finance Minister Luis de Guindos said the European Union agreed to grant Madrid a loan of up to EUR100 billion, which the government will use to recapitalize the country’s ailing banking sector.
But investors remained jittery as details of the Spanish bailout agreement remained unclear, with the exact amount Spain is to receive still be decided, after the results of independent banking audits are published later this month.
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.
Meanwhile, uncertainty over the outcome of a Greek general election on June 17, which could determine the course of the country’s future in the euro zone, also weighed on sentiment.
The U.S. dollar moderated losses against the euro, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.17% to trade at 82.77, recovering from an earlier drop of 0.8% to 82.09.
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 settlement gained 0.20% to trade at USD28.52 a troy ounce, while copper for July delivery gained 1.70% to trade at USD3.34 a pound.
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