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Gold futures slump to 1-month low as weak technical picture weighs

Published 05/16/2013, 03:31 AM
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Investing.com - Gold futures were lower for the sixth consecutive day on Thursday, falling to the weakest level in four weeks as investors continued to sell the precious metal amid a weak technical outlook.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,386.85 a troy ounce during European morning hours, down 0.7% on the day.

Comex gold prices fell by as much as 0.8% earlier in the session to hit a daily low of USD1,385.85 a troy ounce, the weakest level since April 19.

Gold prices were likely to find support at USD1,370.20 a troy ounce, the low from April 17 and resistance at USD1,420.30, the high from April 19.

Gold futures tumbled 2% on Wednesday as a bout of technical selling kicked in after prices broke below key support levels, triggering fresh sell orders amid bearish chart signals.

A broadly stronger U.S. dollar also weighed. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.15% to trade at 84.04.

On Wednesday, the gauge hit the highest level since July after a string of disappointing economic indicators in the U.S. and Europe sparked safe-haven demand for the liquid greenback.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere, data showed that hedge fund billionaire George Soros cut his holdings of gold-backed exchange-traded products in the first quarter.

Funds run by Blackrock and Northern Trust also showed reductions, underlining concerns that investment demand is fading as U.S. stock markers rally to all-time highs.

Comex gold prices suffered a massive sell-off in April, plunging to a 27-month low of USD1,322.25 an ounce on April 16. Prices rebounded to as high as USD1,487.15 a troy ounce on May 3.

However, the precious metal failed to revisit the key psychological USD1,500-level on numerous attempts, indicating chart signals remain bearish.

Gold traders are now looking ahead to a flurry of U.S. economic data later in the day including reports on building permits and housing starts. The U.S. is also to release official data on consumer inflation, initial jobless claims and the Philly Fed manufacturing index.

Any improvement in the U.S. economy could scale back expectations for further easing from the Federal Reserve.

Elsewhere on the Comex, silver for July delivery fell 0.75% to trade at USD22.48 a troy ounce, while copper for July delivery dipped 0.3% to trade at USD3.254 a pound.

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