Forexpros – Gold futures rallied to an 11-week high during U.S. morning trade on Tuesday, as the U.S. dollar weakened broadly amid improved hopes for fresh measures by the European Central Bank to tackle the region’s ongoing debt crisis.
Market participants were also anticipating the minutes of the Federal Reserve’s August policy meeting later in the week, amid speculation over how close the U.S. central bank may be to implementing another round of stimulus measures.
On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,639.45 a troy ounce during U.S. morning trade, jumping 1.15%.
It earlier rose by as much as 1.2% to trade at a session high of USD1,639.85 a troy ounce, the strongest level since June 6.
Gold futures were likely to find near-term support at USD1,601.05 a troy ounce, the low from August 16 and resistance at USD1,642.15, the high from June 6.
Gold’s gains accelerated after breaking above a key technical resistance level close to the USD1,633-level, triggering automatic buy orders amid bullish chart signals.
Demand for the safe haven U.S. dollar was dampened after the U.K.’s Telegraph newspaper said earlier that it could confirm weekend reports that the ECB may set a cap on peripheral euro zone bond yields at its next policy meeting in September.
On Monday, the central bank dismissed the reports, saying it was “misleading” to report on decisions which have not yet been taken.
Speculation over the possibility of ECB intervention saw Spanish borrowing costs fall at an auction of short-term government debt, with Madrid successfully auctioning EUR4.5 billion of bills, the top end of the target range.
Meanwhile, investors were eyeing a series of upcoming euro zone meetings, amid hopes that leaders would make some progress on steps to the stem the crisis in the region.
Luxemburg’s Prime Minister Jean-Claude Juncker, who also heads the group of euro zone finance ministers, was to hold talks with Greek Prime Minister Antonis Samaras on Wednesday, to discuss a two-year extension of the country’s economic reform program.
German Chancellor Angela Merkel is to meet with French President Francois Hollande on Thursday, while Antonis Samaras is to meet with the French and German leaders later in the week.
Market participants were also anticipating the minutes of the Fed’s August policy meeting later in the week.
Upbeat U.S. economic data released last week indicated that the economy may be stabilizing and tempered expectations for another round of quantitative easing by the Fed.
Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system.
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 10% since late February, as the Fed failed to deliver more easing and amid concerns over the euro zone’s deepening debt crisis, which has fueled demand for the precious metal’s hedge, the greenback.
Elsewhere on the Comex, silver for September delivery rallied 2.1% to trade at a two-month high of USD29.19 a troy ounce, while copper for September delivery climbed 2.2% to trade at USD3.446 a pound.
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