Investing.com - Gold futures were up sharply during U.S. morning trade on Monday, moving further off last week’s seven-month low as the U.S. dollar came under pressure amid optimism that economic reforms in Italy would not be derailed by election results.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,588.80 a troy ounce during U.S. morning trade, up 1% on the day.
Prices rose by as much as 1.3% earlier in the session to hit a daily high of USD1,593.80 a troy ounce. Gold futures fell to a seven-month low of USD1,554.80 a troy ounce on February 21.
Gold prices were likely to find support at USD1,554.80 a troy ounce, the low from February 21 and resistance at USD1,609.00, the high from February 20.
Market sentiment was buoyed by hopes that a pro-reform government would emerge following general elections. Meanwhile, speculation over a low voter turnout in northern Italy help ease concerns over a strong election performance by former Prime Minister Silvio Berlusconi.
Exit polls were due to be published after voting closed at 3pm local time, with final results expected Tuesday.
The news prompted investors to move in to riskier assets such as the euro and industrial commodities and shun safe-haven assets like the U.S. dollar and Treasuries.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.35% to trade at 81.27.
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.
Meanwhile, gold traders awaited testimony on Tuesday from Federal Reserve Chairman Ben Bernanke for further clues of when the Fed may slow or stop buying bonds.
The precious metal drew support from reassuring comments from St. Louis Fed President James Bullard, who said on Friday that the central bank's aggressive monetary policy will stay in place for a "long time."
The comments helped ease concerns the central bank will end its quantitative easing program sooner-than-expected.
Gold futures sold off last week after the minutes of the Fed’s January meeting showed that policymakers discussed the slowing or stopping of USD85 billion in monthly bond purchases even before the job market improves.
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.
Some bargain-hunting and technical buying also contributed to gains as investors entered the market after prices bounced off a key support level.
Market analysts noted that gold prices found support at the USD1,550-level, prompting investors to enter the market and open fresh long positions amid bullish chart signals.
Elsewhere on the Comex, silver for May delivery surged 1.5% to trade at USD28.96 a troy ounce, while copper for May delivery tacked on 0.7% to trade at USD3.575 a pound.
Copper traders digested data showing manufacturing activity in China expanded at the slowest rate in four months in February.
China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, fell to a four-month low of 50.4 in February from a final reading of 52.3 in January.
The measure however still remains above 50.0, indicating an expansion in manufacturing activity.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
