Gold trading remained mixed in Asian trade Wednesday as the U.S. dollar rose on the back of a credit rating downgrade on Spain. Spain’s credit level was cut for the third time in less than a month, as the country’s weak banks continue to worry investors. Gold is likely to remain volatile as investors continued to fret about the euro zone debt crisis with Spain’s borrowing costs spiraling towards unsustainable levels, keeping the euro close to its lowest level in nearly two years.
Political uncertainty in Greece will keep investors on edge for now. Though pro-bailout conservatives have topped recent opinion polls, analysts said the vote on the June 17 elections was still too close to call. Policy makers are waiting for clarity on the status before they allow accommodation to support growth. Until the market is convinced of that intention, Gold could remain in a directionless drift. Investors are waiting for central banks to respond with more monetary measures to help shore up the economies.
The ICE dollar index, which gauges the greenback’s performance against a basket of six other major currencies, climbed to 82.564 from 82.468 in North American trade Tuesday afternoon.
The European Commission will set out its economic strategy for the euro zone today. The Commission will issue specific recommendations for each of the 27 European Union members, as well as for the 17 sharing the euro. Once endorsed by EU leaders in June, the executive’s plans will become binding for the 27-nation bloc. Some economists expect a switch in the Commission’s focus to structural budget deficits, which exclude one-off items and the effects of the economic cycle, from headline deficits, which at a time of recession are larger. Some policymakers have saidMadridcould get more time to reduce its deficit if it presented a credible 3-4 year plan of fiscal adjustment. The need for more time was underlined last week, when previously undisclosed data showed Spain’s 17 autonomous regions will need to refinance 36 billion euros of debt this year, rather than the 8 billion euros initially expected. It also faces a 19 billion euros bill to rescue troubled lender Bankia.
Gold trading has recently been moving in lockstep with the Euro, which fell to its lowest level against the dollar in nearly two years as investors continue to fret about Spain’s vulnerable fiscal conditions. Continuous weakness in other currencies and strength in the dollar have kept gold, precious metals and commodities generally depressed.
Holdings of the iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, dropped nearly half a percent from the previous session to 9,619.03 metric tons (10603.1 tons) by May 29, the lowest in nearly two weeks.
Technical levels: Gold trading may now face resistance at $1605 & then at $1657 levels. Gold will get hyper Bullish only on a break with sustained momentum above $1765 to $1801 range. A decline with a repeat close below $1540 may send Gold sharply down to $1270 levels also. Silver trading may now face immediate resistance at $29.71, $30.70 & then at $32.50 levels. A longer term strong Bullishness in Silver will be triggered only on a sustained break above the $33.40 to $34.75 range. Silver has under performed gold this month, on track to decline 7.6% after falling to its lowest price this year at $26.73. Silver, as repeatedly alerted, has a strong technical support at $26.20 on the downside. Any breach with a sustained momentum on closing basis below this range may signal a strong bearish trend for Silver & may decline further to $22.60.