Investing.com - Gold prices came under heavy selling pressure on Friday, touching the lowest level in two weeks as the U.S. dollar strengthened amid growing fears Greece was headed towards a messy sovereign debt default.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery settled at USD1,723.95 a troy ounce by close of trade on Friday, shedding 0.54% over the week, the second consecutive weekly decline.
Gold futures were likely to find short-term support at USD1,706.85 a troy ounce, Friday’s low and the lowest since January 26 and resistance at USD1,754.95, the high from February 9.
On Thursday, Greek political leaders reached a long awaited consensus on the conditions set by international creditors in exchange for a new bailout worth EUR130 billion.
However, Greece’s parliament must now approve the proposed spending cuts in a vote slated for Sunday, before the country’s lenders will release the aid package.
Concerns over a chaotic default grew after Greek media reported Friday that a junior member of the country’s three-party ruling coalition refused to back the austerity measures and offered to resign.
Meanwhile, Fitch Ratings reiterated its opinion that Greece will default even if it obtains the bailout funds.
The news prompted investors to shun riskier assets, such as stocks and high yielding currencies and flock to traditional safe haven assets like the U.S. dollar and Treasuries.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, gained 0.54% on Friday to settle the week at 79.11.
Some traders also sold profitable gold positions to offset losses in other markets, while others pulled cash out of broader markets on concerns of a sharper downturn.
Although gold is often seen as a safe haven during times of economic uncertainty, the increasingly grave debt crisis in the euro zone has done little to buoy appetite in gold recently. A weakening euro and stronger dollar have weighed on gold instead.
Gold prices came off their lows after the CME Group, operator of the Comex reduced the amount of cash that traders must deposit for speculative positions by 12% to USD10,125. The new rates will be effective after the close of trading Monday, the company said in a statement.
German lender Commerzbank noted that the move was supportive of prices, saying "In August and September of last year, CME had almost doubled the margin within just a few weeks, thereby contributing to the sharp fall in the price of gold."
Exchanges require market participants to post margin to cover potential losses in future trading sessions, and to avoid a default by a trader.
Gold prices spiked nearly 1.5% on Tuesday after Federal Reserve Chairman Ben Bernanke said in a testimony to the Senate Budget Committee in Washington that the recent decline in the U.S. unemployment rate understated weakness in the labor market and that the economic outlook remains “uncertain”.
The comments fuelled speculation that a third round of bond purchases, also known as quantitative easing was still a possibility for the bank.
Elsewhere on the Comex, silver for March delivery settled at USD33.57 a troy ounce by close of trade on Friday, easing down 0.23% on the week, while copper for March delivery settled at USD3.862 a pound, declining 0.66% over the week.
The CME Group announced that it also reduced the amount of collateral that traders must provide to trade copper and silver futures. Costs to trade Comex copper futures will fall 13% and costs to trade silver futures will decline 14%.
In the week ahead, euro zone finance ministers are expected to meet on Tuesday to discuss Greece’s bailout deal, which should lead to a final approval by the country’s international lenders, including the International Monetary Fund and the ECB.
Investors will also be awaiting preliminary data on euro zone gross domestic product and U.S. retail sales, to assess the impact of the fiscal crisis in the euro zone on global growth.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery settled at USD1,723.95 a troy ounce by close of trade on Friday, shedding 0.54% over the week, the second consecutive weekly decline.
Gold futures were likely to find short-term support at USD1,706.85 a troy ounce, Friday’s low and the lowest since January 26 and resistance at USD1,754.95, the high from February 9.
On Thursday, Greek political leaders reached a long awaited consensus on the conditions set by international creditors in exchange for a new bailout worth EUR130 billion.
However, Greece’s parliament must now approve the proposed spending cuts in a vote slated for Sunday, before the country’s lenders will release the aid package.
Concerns over a chaotic default grew after Greek media reported Friday that a junior member of the country’s three-party ruling coalition refused to back the austerity measures and offered to resign.
Meanwhile, Fitch Ratings reiterated its opinion that Greece will default even if it obtains the bailout funds.
The news prompted investors to shun riskier assets, such as stocks and high yielding currencies and flock to traditional safe haven assets like the U.S. dollar and Treasuries.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, gained 0.54% on Friday to settle the week at 79.11.
Some traders also sold profitable gold positions to offset losses in other markets, while others pulled cash out of broader markets on concerns of a sharper downturn.
Although gold is often seen as a safe haven during times of economic uncertainty, the increasingly grave debt crisis in the euro zone has done little to buoy appetite in gold recently. A weakening euro and stronger dollar have weighed on gold instead.
Gold prices came off their lows after the CME Group, operator of the Comex reduced the amount of cash that traders must deposit for speculative positions by 12% to USD10,125. The new rates will be effective after the close of trading Monday, the company said in a statement.
German lender Commerzbank noted that the move was supportive of prices, saying "In August and September of last year, CME had almost doubled the margin within just a few weeks, thereby contributing to the sharp fall in the price of gold."
Exchanges require market participants to post margin to cover potential losses in future trading sessions, and to avoid a default by a trader.
Gold prices spiked nearly 1.5% on Tuesday after Federal Reserve Chairman Ben Bernanke said in a testimony to the Senate Budget Committee in Washington that the recent decline in the U.S. unemployment rate understated weakness in the labor market and that the economic outlook remains “uncertain”.
The comments fuelled speculation that a third round of bond purchases, also known as quantitative easing was still a possibility for the bank.
Elsewhere on the Comex, silver for March delivery settled at USD33.57 a troy ounce by close of trade on Friday, easing down 0.23% on the week, while copper for March delivery settled at USD3.862 a pound, declining 0.66% over the week.
The CME Group announced that it also reduced the amount of collateral that traders must provide to trade copper and silver futures. Costs to trade Comex copper futures will fall 13% and costs to trade silver futures will decline 14%.
In the week ahead, euro zone finance ministers are expected to meet on Tuesday to discuss Greece’s bailout deal, which should lead to a final approval by the country’s international lenders, including the International Monetary Fund and the ECB.
Investors will also be awaiting preliminary data on euro zone gross domestic product and U.S. retail sales, to assess the impact of the fiscal crisis in the euro zone on global growth.