Forexpros – Gold futures rallied during U.S. trade Wednesday, as the release of disappointing U.S. retail sales data triggered hopes for a third round of monetary easing by the Federal Reserve.
The precious metal also found some safe-haven support as concerns over the handling of Spain’s financial crisis and surging Italian borrowing costs continue to dominate market sentiment.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,619.35 a troy ounce during U.S. afternoon trade, gaining 0.34%.
It earlier rose by as much as 0.65% to trade at USD1,624.55, the highest since June 7.Prices touched a one-month high of USD1,642.15 on June 6.
Gold futures were likely to find support at USD1,559.35 a troy ounce, the low from June 8 and resistance at USD1,642.15, the high from June 6.
Gold futures rallied to the highest levels of the session after the Commerce Department said U.S. retail sales fell by a seasonally adjusted 0.2% in May, falling for the second successive month and marking the first back-to-back- decline in two years.
April’s figure was revised to a 0.2% decline from a previously reported gain of 0.1%.
Core retail sales, which exclude automobile sales, fell by 0.4% last month, the biggest decline since May 2010.
A separate report showed that U.S. producer price inflation fell 1.0% in May, the largest monthly decline since July 2009.
The weak data added to expectations that the Federal Reserve may implement a third round of easing to shore up economic growth after Chicago Fed President Charles Evans reiterated his support for additional monetary stimulus on Tuesday.
Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
The renewed easing hopes weighed on the U.S. dollar. The dollar index was down 0.2% to trade at 82.69.
Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the dollar and support gold.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 9.5% since late February, amid growing concerns the European debt crisis has been escalating, which has fueled demand for the yellow metal’s hedge, the greenback.
Meanwhile, some safe haven buying further supported the yellow metal, amid worries that a bailout of as much as EUR100 billion for Spain’s banks will add to the country’s debt burden and make it more difficult for Madrid to access credit markets.
The yield on Spanish 10-year bonds ticked up to 6.76% earlier, close to the critical 7% level, which is viewed as unsustainable in the long run after it prompted bailouts in Greece, Ireland and Portugal.
Concerns that Italy may be the next euro zone country to require a bailout intensified earlier after the country saw one-year borrowing costs surge to the highest level since December at an auction of government bonds earlier.
Investors were also jittery ahead of Sunday’s general election in Greece, which could determine the country’s future in the euro zone.
Elsewhere on the Comex, silver for July delivery gave back 0.09% to trade at USD28.93 a troy ounce, while copper for July delivery was flat to trade at USD3.336 a pound.
&nb
Forexpros
