Price of gold edges higher but stays near $1650 as a weaker euro weighs

The price of an ounce of gold edged higher on Wednesday after a successful Spanish debt auction eased fears about the euro zone debt crisis, but gains were capped as the euro currency remained under pressure ahead of a longer term debt sale in Madrid later this week.

Latest Gold Prices

Spot gold inched up 0.2 percent to $1,652.84 per ounce by 0626 GMT, after touching a one week low near $1,634 in the previous session. US gold gained 0.2 percent to $1,654.30.

The most actively traded contract, for June delivery, gained $1.40, or 0.1 percent, to settle at $1,651.10 per ounce on the Comex division of the New York Mercantile Exchange on Tuesday.

Euro Concerns

“The nervousness around the euro zone has eased a bit, which could help stabilise the euro and support gold prices,” said Shanghai CIFCO Futures analyst Li Ning.

But Li added that market sentiment remained cautious ahead of a policy meeting by the US Fed next week, after comments from the Fed over recent weeks have caused sharp price fluctuations.

Adding to the cautious tone were lingering concerns about Spain’s finances. Although Spain managed to exceed the target at Tuesday’s debt auction, it was forced to pay a stiff premium compared with a month earlier, boding ill for a key long term debt sale on Thursday.

“One side of the coin is that equities continue to perform very well, which at one point could weigh on gold. The other side of the coin is that the European debt crisis continues to deteriorate and that should be supportive of gold. So we have a bit of a status quo,” said Graham Leighton, director of precious metals at Newedge.

Weaker US Dollar and Gold Prices

A weaker US dollar, which eased against a basket of international currencies, also fanned interest in gold futures. Gold is priced in dollars and seems cheaper to investors who hold other currencies when the dollar softens. The ICE US Dollar Index was recently down 0.1 percent at 79.474.

Originally posted here: 
Price of gold edges higher but stays near $1650 as a weaker euro weighs