FX:Gold futures edge higher; Greece, fiscal cliff in focus
Forexpros - Gold futures edged higher during European morning trade on Monday, as market players remained fixated on developments surrounding Greece’s debt woes and the fiscal outlook in the U.S.
Encouraging Chinese economic data helped boost appetite for riskier assets, weakening the U.S. dollar and increasing the appeal of dollar-denominated commodities.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,721.55 a troy ounce during European morning trade, up 0.5% on the day.
Prices traded in a tight USD5-range between USD1,717.65 a troy ounce, the daily low and a session high of USD1,722.45 a troy ounce.
Gold prices were likely to find near-term support at USD1,708.35 a troy ounce, the low from November 28 and resistance at USD1,733.65, Friday’s high.
Euro zone finance ministers were to hold talks in Brussels later in the day to discuss the terms of the new Greek aid deal, as well as details of an EUR10 billion bailout for Cyprus.
On Friday, German lawmakers approved the latest aid package for Greece by a large majority, clearing the way for the country to receive EUR44 billion in loans.
Meanwhile, a report from HSBC released earlier confirmed that manufacturing activity in China expanded for the first time in more than a year last month. The final version of China’s HSBC Purchasing Managers Index rose to 50.4 in November from a final reading of 49.5 in October.
The data came after a report from the state-affiliated China Federation of Logistics and Purchasing over the weekend, which showed manufacturing activity improved to a seven-month high of 50.6 in November, up 0.4 point over October.
The upbeat data added to signs of growth recovery in the world’s second largest economy.
The euro hit a six-week high against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.3% to trade at 79.97, the weakest level since November 1.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
But gains were limited as investors remained concerned over the looming fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1, unless a divided Congress and the White House can work out a compromise in the four weeks left before the deadline.
House of Representatives Speaker John Boehner spooked investors on Friday after saying there was a stalemate between Republicans and President Barack Obama’s administration.
He added that President Obama’s proposal of USD1.6 trillion in new tax revenue and less than USD400 billion in spending cuts was not “serious.”
There are fears that U.S. lawmakers will repeat the same political divisiveness that led Standard & Poor's to downgrade the U.S.’s AAA rating in August 2011 and tip the country back into a recession.
Elsewhere on the Comex, silver for March delivery rallied 1.3% to trade at USD33.70 a troy ounce, while copper for March delivery rose 0.15% to trade at USD3.656 a pound.
