Gold edges up on euro zone fears, dollar limits gains

NEW YORK Wed Jul 25, 2012 1:33am IST

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011. REUTERS/Mike Segar

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in this picture taken in New York, September 15, 2011.

Credit: Reuters/Mike Segar

NEW YORK (Reuters) - Gold edged up on Tuesday, outperforming equities for the second day in a row as worried investors bought the precious metal as a safe haven after European Union officials predicted Greece will need more debt restructuring.

Gold prices seesawed early, then reversed losses as EU officials said Greece probably will not be able to pay its debts, making further restructuring necessary.

Bullion's gains were limited, and gold futures slightly lower as the euro fell against the U.S. dollar. Europe's private sector looked set for a prolonged slump after surveys showed the downturn that began in the euro zone's small economies was now entrenched in Germany and France.

"Gold is mostly taking its cues from the euro-dollar. Volume is pretty decent, suggesting there are good underlying bids here," said Jonathan Jossen, an independent COMEX gold options floor trader.

Dealers said the euro-dollar move has taken the lead role in dictating day-to-day moves in gold, as impetus from central-bank monetary policy announcements and the physical markets petered out.

Spot gold was up 0.1 percent at $1,577.86 an ounce by 3:04 p.m. EDT (1904 GMT), moving in a relatively quiet range of less than $20.

U.S. COMEX August gold futures for August delivery settled down $1.20 at $1,576.20, with trading volume about 15 percent above its 30-day average, preliminary Reuters data showed.

A 1 percent drop in the S&P .SPX and tumbling grain prices after the previous session's record rally also capped further gains in gold. U.S. Treasuries bond yields fell to a new low on safety buying. .N <GRA/> <US/>

More evidence of a slowing U.S. economy weighed on the financial markets. The U.S. Richmond Federal Reserve Bank's monthly manufacturing composite index in July fell to its weakest reading since April 2009. <ID:TAR001673>

COMEX OPTION EXPIRY EYED

COMEX floor trader Jossen said that bullish options strategies such as butterfly spreads were traded at higher strike prices such as $1,900 and $2,200 an ounce.

TD Bank said in a note that open interest for COMEX August options was concentrated around the round-number strike prices including $1,600, $1,550 and $1,650, and that would likely keep gold moves muted. The August options are expiring on Thursday.

"Traders have become more tentative and are quicker to take profits when the opportunity presents itself," said Michael Daly, precious metals analyst at futures brokerage Ironbeam.

Daly said that volatility in precious metals will rise on euro zone debt worries and heightened tensions in the Middle East.

Among other metals, silver edged down 0.4 percent to $26.89 an ounce, while spot platinum was down 0.7 percent at $1,382.24 an ounce and spot palladium dropped 1 percent to $560.75 an ounce.

Palladium hit a 2012 low at $551.68 as economic worries hurt the metal mostly consumed as catalytic converters by the auto industry.

(Additional reporting by Jan Harvey in London; Editing by Steve Orlofsky and David Gregorio)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

RBI Policy Review

RBI Policy Review

RBI keeps rates on hold, warns on inflation  Full Article 

Monsoon Season

Monsoon Season

India's 2014 monsoon ends with double-digit rain deficit .  Full Article 

Cleanliness Drive

Cleanliness Drive

Modi orders officials to clean loos on Gandhi's birthday.  Full Article 

Bid to Boost Trading

Bid to Boost Trading

RBI takes small steps to deepen markets.  Full Article 

Car Recall

Car Recall

Maruti Suzuki says to recall 69,555 cars.  Full Article 

China Factory Data

China Factory Data

China final HSBC PMI steady in September on stronger global demand but risks remain  Full Article 

Oil Demand

Oil Demand

India's thirst for oil grows even as China cuts back  Video 

EBay Divests PayPal

EBay Divests PayPal

EBay to spinoff PayPal in 2015  Full Article 

New 'Windows'

New 'Windows'

Microsoft names next operating system 'Windows 10'.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage