By Claudia Assis and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures lost steam on Tuesday, swerving between small gains and losses as some optimism emerged following a relatively well-received Spanish bond auction.
Prices had traded higher during most of Asian and European trading hours as the U.S. Federal Reserve prepared to kick off a policy meeting which could open the door to fresh easing measures and create further upside for gold.
Gold for August delivery GCQ2 +0.03% retreated $2.60, or 0.2%, to $1,624 an ounce on the Comex division of the New York Mercantile Exchange. The metal had traded as high as $1,634.30 an ounce earlier.
The Spanish government managed to sell more than expected at a debt auction earlier Tuesday and most markets, including oil futures and U.S. stocks, pushed higher.
Yields on the benchmark Spanish paper continued to trade above 7%, however.
In the longer term, gold will continue to improve through 2012 and into 2013, driven by a growing likelihood of policy action by central banks, BNP Paribas precious metals strategist Anne-Laure Tremblay said in a note to clients.
“Probable actions include interest rate cuts by the European Central Bank and the People’s Bank of China [and] further quantitative easing by the Federal Reserve,” Tremblay wrote.
The Federal Reserve will begin a two-day policy meeting on Tuesday, and expectations that the central bank will unveil more easing measures have gathered steam. Read a preview of the Fed meeting.
Such action would likely support gold buying, BNP Paribas’s Tremblay said.
“Quantitative easing, or an expansion of a central bank’s balance sheet, is more favorable for gold prices…[as it] tends to have a strong negative impact on the U.S. dollar and is also more likely to raise inflationary expectations,” she said.
The dollar was weaker, with the dollar index DXY -0.46% , which compares the U.S. unit to a basket of six other currencies, recently stood at 81.572, down slightly from 81.584 in North American trade late Monday.
A softer greenback tends to support gold investment, as it makes the metal more affordable to holders of other currencies.
The broader metals complex was mixed, with silver for July delivery SIN2 -.00% down less than a cent to $28.67 an ounce.
July copper HGN2 +0.96% rose 2 cents, or 0.7%, to $3.42 a pound.
Platinum for the same month’s delivery PLN2 +0.12% trimmed gains, recently up 50 cents to $1,484.60 an ounce. Palladium for September turned lower and retreated $2, or 0.3%, to $631.15 an ounce.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Virginia Harrison is a MarketWatch reporter based in Sydney.
