Forexpros – Gold futures were up on Monday, trading close to the highest level in seven days after China’s central bank announced fresh easing measures over the weekend, while markets eyed a meeting of euro zone finance ministers later in the day to finalize the terms of Greece’s second bailout package.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,732.85 a troy ounce during early European morning trade, gaining 0.4%.
It earlier rose by as much as 0.75% to trade at USD1,738.65 a troy ounce, the highest since February 15.
Futures were likely to find short-term support at USD1,718.65 a troy ounce, Friday’s low and resistance at USD1,754.95, the high from February 9.
Gold prices spiked higher in early Asian action, as sentiment was lifted after the People’s Bank of China announced over the weekend that it cut the reserve requirement ratio for major commercial banks to 20.5% from 21%, the second cut in nearly three months.
The move was expected to free up as much as CNY400 billion in an effort to boost lending and spur growth in the world’s second-biggest economy.
Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies, boosting the metal’s appeal as an inflation hedge.
However, prices came off their earlier highs as investors turned their attention to talks surrounding Greece’s much-needed second aid package.
While investors expected euro zone finance ministers to approve a much needed EUR130 billion bailout for Greece at a meeting in Brussels later in the day, negotiations have been known to unravel in the recent past.
Without a bailout, Athens faces the threat of defaulting when a EUR14.5 billion bond redemption comes due on March 20.
Gold prices have moved in a range between USD1,700 and USD1,760 since the beginning of February, closely tracking developments surrounding Greece’s bailout talks.
HSBC Holdings said in a report over the weekend that, “Gold cannot seem to break away from the influence of the wider financial markets. The eventual settlement of the euro zone sovereign debt crisis should eventually break this link.”
“Until then, gold trading is likely to be volatile and prone to chase euro zone and especially Greek headlines,” the report added.
Elsewhere on the Comex, silver for March delivery rose 0.8% to trade at USD33.48 a troy ounce, while copper for March delivery rallied 1.6% to trade at USD3.766 a pound.
Comex floor trading will be closed on Monday for the U.S. Presidents Day holiday.
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