FX:Gold futures off 6-week low with Greece debt swap in focus
Forexpros - Gold futures edged higher on Wednesday, taking cues from the currency market as investors continued to monitor developments surrounding Greece’s debt swap deal, while some bargain buying emerged following the previous day’s steep decline.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,675.45 a troy ounce during early European morning trade, edging 0.2% higher.
It earlier rose by as much as 0.3% to trade at a session high USD1,679.25 a troy ounce. Prices fell to USD1,663.75 on Tuesday, the lowest since January 26.
Gold futures were likely to find support at USD1,663.75 a troy ounce, Tuesday’s low and resistance at USD1,709.75, Tuesday’s high.
Gold’s gains came as the euro pushed higher against the U.S. dollar, coming off an almost two-week low. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.2% to trade at 79.74.
Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
Wall Street lender Citigroup said in a report Tuesday that, "Gold this year has been driven by exchange-rate mechanisms.”
The report added that, “At some point, if confidence over Europe evaporates, you would think that should be positive for gold, but you still have to keep an eye on the dollar-gold trade-off."
Although gold’s appeal as a safe-haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal. A weakening euro and stronger dollar have weighed on gold instead.
Markets remained jittery ahead of the March 8 deadline for bondholders to join the agreement under which they will exchange their existing Greek government bonds for new paper in a swap deal.
There is uncertainty over how much participation Greece will see for its bond swap. The Greek government has set a minimum 75% participation rate to proceed.
A failure to agree on the swap would put the country back on the brink of a messy sovereign debt default and could reignite fears about the collapse of the single currency.
Meanwhile, market participants noted some bargain buying, as the previous day’s 2% drop created buying opportunities for investors.
Gold’s losses accelerated Tuesday after prices broke below their 200-day moving average, indicating a downward momentum in prices.
Market participants said that fresh sell orders were triggered once prices fell below a key technical support level close to USD1,675 an ounce.
The precious metal last fell below its 200-day moving average on December 15.
Elsewhere on the Comex, silver for May delivery rose 0.5% to trade at USD32.95 a troy ounce, while copper for May delivery added 0.5% to trade at USD3.757 a pound.
