FX:Gold edges higher; markets await Fed, euro zone bond sales
Forexpros - Gold futures edged modestly higher during European morning trade on Tuesday, as market participants awaited a number of key euro zone bond auctions as well as a meeting of Federal Reserve policy makers later in the day.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,637.65 a troy ounce during early European trade, adding 0.3%.
The June contract traded in a tight range of USD1,639.85, the daily high and a session low of USD1,634.75 a troy ounce.
Gold futures were likely to find short-term support at USD1,613.55 a troy ounce, the low from April 4 and resistance at USD1,658.95, the high from April 16.
Gold prices came under heavy selling pressure on Monday, as political uncertainty in France and the Netherlands, combined with weak manufacturing data out of the euro zone and China drove investors to seek the relative safety of the U.S. dollar.
Gold prices often move inversely to the U.S. dollar, as gold becomes less expensive for buyers using other currencies.
Market participants stuck to the sidelines ahead of closely-watched bond auctions from the Netherlands, Spain and Italy later in the day.
The Netherlands was due to auction up to EUR2.5 billion in bonds maturing in 2014 and 2037 in a key test of market confidence in the country’s debt.
Dutch Prime Minister Mark Rutte on Monday tendered his government's resignation in a crisis over budget cuts, creating a political vacuum in one of the region’s most stable nations.
Overnight, Moody's warned that the crisis was "credit negative", but said it was maintaining its current rating of AAA with a stable outlook.
Elsewhere, Spain was to sell up to EUR2 billion in three- and six-month bonds, while Italy was expected to sell two-year government debt.
Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.
Gold traders were also looking ahead to a meeting of Federal Reserve policymakers on Tuesday and Wednesday to discuss the economy and monetary policy.
Traders are hoping there might be some show of support for a third round of bond purchases, dubbed quantitative easing III or QE3, to support the U.S. economy.
Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.
Elsewhere on the Comex, silver for July delivery jumped 0.95% to trade at USD30.89 a troy ounce, while copper for July delivery rose 0.85% to trade at USD3.666 a pound.
