By Sarah Turner, MarketWatch
MADRID (MarketWatch) — Gold futures struggled on Wednesday, as economic data showed housing starts hit a four-year high, erasing gains stemming from growing optimism on progress toward a solution to Europe’s debt troubles.
Gold for December delivery GCZ2 -0.06% pared an earlier gain of around $6 to 50 cents, trading at $1,747.30 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.
Gold closed higher on Tuesday to notch its first advance in three sessions, after reports that Spain was considering applying for a credit line from the European Union’s bailout fund helped support the euro against the dollar.
The euro extended gains against rivals, hitting a one-month high against the U.S. dollar on Wednesday after Moody’s Investors Service affirmed Spain’s sovereign rating at Baa3, albeit with a negative outlook.
Weakness in the dollar tends to aid dollar-denominated commodities, such as gold, because it makes them cheaper for holders of other currencies. Read: Euro hits 1-month high as Moody’s affirms Spain
Data from the U.S. wiped out earlier gains as construction on new U.S. homes surged 15% in September to an annual rate of 872,000. That easily beat economists’ forecasts. Read: U.S. home construction surges in September
Gold and other assets will be looking for more global economic direction on Thursday when China is due to release third-quarter gross-domestic-product data. Read The Tell: China cooling may seal gold's demise
But some analysts expect gold prices to stabilize. In a note, Commerzbank commodity strategists said that following a recent price drop, “physical buying interest in Asia ahead of the festival season in India can be expected to pick up, thereby stabilizing prices.”
The strategists also said that monetary policy and supply could prove supportive for the precious metal.
“Ultra-expansionary monetary policy pursued by central banks suggests that the gold price will rise again in the near future, as do the ongoing strikes in the South African gold mines,” they said.
Strikes in South Africa are thought to be affecting half the gold production of this fifth-largest gold producer country, they noted.
December silver futures SIZ2 -0.10% SIZ2 -0.10% SIZ2 -0.10% were flat at $32.96 an ounce, while copper HGZ2 +0.11% for delivery in the same month was flat at $3.70 a pound.
January platinum PLF3 +0.73% climbed $12.30 an ounce to $1,657.50 while December palladium PAZ2 +0.67% rose $4.95 to $643.90 an ounce.
Sarah Turner is MarketWatch's bureau chief in Sydney.
