Gold, silver futures edge higher after previous session’s sell-off

Investing.com - Gold futures rose for the first time in three sessions on Thursday, as the previous day’s steep drop to a three-month low created bargain buying opportunities for investors reluctant to bet that prices would fall further.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,626.05 a troy ounce during early European trade, gaining 0.74%.      

It earlier rose by as much as 0.85% to trade at a session high USD1,628.05 a troy ounce. Gold futures fell to USD1,613.55 on Wednesday, its lowest level since January 10 and below its 50-day moving average.

Gold futures were likely to find support at USD1,606.05 a troy ounce, the low from January 9 and resistance at USD1,685.25, the high from April 2.

Trading is expected to be thin ahead of the Easter holiday. Markets in the U.S. and Europe will remain closed on Friday in observance of Good Friday. Most markets in Europe will be shut next Monday as well.

Gold futures plunged more than 4% in the two sessions leading up to Thursday, including a 3% drop on Wednesday as traders readjusted positions after minutes from the March meeting of the Federal Reserve's Open Market Committee released Tuesday indicated that the central bank was unlikely to introduce more stimulus measures to help boost the U.S. economy in the near term.

This was the second time in a month that gold has sold off in response to signals from the Fed that more easing is not guaranteed.

Gold prices dropped almost 5% in the three sessions following March’s Fed meeting after the central bank gave an upbeat assessment of the U.S. economy, which reduced expectations for a third round of monetary easing in the U.S.

Wall Street investment bank Morgan Stanley downgraded its forecast of further quantitative easing by the Federal Reserve to one-out-of-three chance from two out of three.

Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.

Attention now shifts to Friday’s U.S. non-farm payrolls data, which could shed further light on the strength of the U.S. economy and the need for further monetary easing in the U.S.

Resurfacing concerns over the euro zone’s debt crisis also added to the gloomy trade environment, after Spain’s Treasury on Wednesday auctioned EUR2.59 billon of government bonds, short of the maximum targeted amount of EUR3.5 billion, in the country’s first debt auction since last week’s austerity budget.

There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears over the fiscal health of the region’s fourth largest economy. On Tuesday, Spain’s government announced that the country’s public debt will rise to a record 79.8% of gross domestic product this year.

Elsewhere on the Comex, silver for May delivery jumped 1.5% to trade at USD31.51 a troy ounce, while copper for May delivery added 0.35% to trade at USD3.804 a pound.