On Tuesday gold held steady, as market players continued to monitor the movements of the dollar and reflect on the timing of the first U.S. rate hike.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery ticked down 80 cents, or 0.07%, to trade at $1,207.40 a troy ounce during European morning hours. Futures were likely to find support at $1,190.00, the low from February 24, and resistance at $1,223.00, the high from March 2.
Yesterday gold hit $1,223.00, the most since February 17, before ending at $1,208.20, down $4.90, or 0.4%, as upbeat U.S. economic reports boosted the dollar and sparked expectations for a rate hike in the near future.
In the meantime, silver futures for May delivery dipped 2.6 cents, or 0.16%, to trade at $16.42 a troy ounce. On Monday, silver slumped 10.7 cents, or 0.65%, to close at $16.45.
Copper for May delivery inched down 2.9 cents, or 1.08%, to trade at $2.669 a pound as investor excitement over a weekend interest rate cut in China waned. On Monday copper prices touched a seven-week high of $2.716 after the People's Bank of China cut its benchmark interest rate by a quarter percentage point in an effort to boost growth and stave off deflation in the world's second largest economy. It was the second rate cut in less than four months, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.
The greenback had strengthened against the euro and the yen on Monday as data showing U.S. manufacturing activity continuing to expand in February supported expectations for higher interest rates.
Wall Street's Dow and S&P 500 both hit fresh record highs on Monday, while the Nasdaq broke above the key 5,000-mark for the first time since March 2000.
The euro was likely to remain pressured as investors turned their attention to the upcoming European Central Bank meeting on Thursday, when it was expected to announce details of its quantitative easing program.
Traders also looked ahead to the release of the latest U.S. nonfarm payrolls report on Friday, for further indications on the strength of the recovery in the labor market. Analysts expect that the U.S. economy added 240,000 jobs in February, slowing from a gain of 257,000 in January, while the unemployment rate was forecast to decline to 5.6% from 5.7%.
A strong U.S. nonfarm payrolls report was likely to add to speculation over when the Federal Reserve will begin to raise interest rates, while a weak number could boost gold by undermining the argument for an early rate hike.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
