FRX: Gold futures hit 6-month high after ESM ruling, Fed meeting eyed
Forexpros - Gold futures rose to the highest level since February during U.S. morning hours on Wednesday, after Germany’s constitutional court approved the ratification of the euro zone’s bailout fund and amid hopes of further easing from the U.S.
On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,738.95 a troy ounce during U.S. morning trade, adding 0.4%.
Prices rose by as much as 0.8% earlier in the session to a hit a daily high of USD1,746.55 a troy ounce, which was the strongest level since February 29.
Gold prices were likely to find support at USD1,688.85 a troy ounce, the low from September 6 and near-term resistance at USD1,761.85, the high from February 21.
Germany's Federal Constitutional Court rejected pleas to block the ratification of Europe's EUR500 billion permanent rescue fund, clearing the way for Germany’s president to ratify the ESM under certain conditions and allowing the European Central Bank’s bond purchasing program to proceed.
However, the judges attached various conditions to the ESM, saying the country’s liability to the fund must not exceed EUR190 billion without the approval of the lower house of parliament and said that both houses of parliament must be kept informed about decisions relating to the ESM.
Meanwhile, markets continued to eye the outcome of the Fed’s policy meeting on Thursday, amid fresh speculation that the U.S. central bank may announce a third round of bond purchases, or quantitative easing, to boost growth.
Market expectations of a QE3 announcement this week increased after last Friday’s weaker-than-expected jobs report and following a speech from Fed Chief Ben Bernanke at Jackson Hole last month.
Past monetary stimulus rounds weakened the U.S. dollar, boosting the price of dollar-denominated commodities like gold.
The U.S. dollar took an additional hit after ratings agency Moody’s warned Tuesday that it could downgrade the U.S’s triple-A rating if budget negotiations for 2013 do not result in policy measures which will reduce the country’s debt.
Elsewhere on the Comex, silver for December delivery rose 0.45% to trade at USD33.72 a troy ounce, while copper for December delivery shed 0.35% to trade at USD3.684 a pound.
