Gold down, silver plunges on strong greenback, euro fears

Investing.com - Gold futures traded lower during U.S. afternoon hours Thursday, hitting the lowest levels of the session after data showed the U.S. economy’s growth rate was unchanged in the first quarter and first-time filings for jobless benefits last week fell slightly.

Growing doubts that a European Union summit would yield progress on tackling the region’s debt crisis further weighed, as it weakened the euro and lifted the U.S. dollar. 

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,552.95 a troy ounce during U.S. morning trade, plunging 1.61%.      

Gold futures were likely to find short-term support at USD1,546.35 a troy ounce, the low from June 1 and resistance at USD1,605.25, the high from June 21.

Gold futures fell to the lowest levels of the day after official data confirmed that the U.S. economy expanded at an annualized rate of 1.9% during the first quarter, in line with expectations.

A separate report from the U.S. Department of Labor said the number of people who filed for unemployment assistance last week fell by 6,000 to a seasonally adjusted 386,000, compared to expectations for a decline of 7,000 to 385,000.

The previous week’s figure was revised up to 392,000 from a previously reported 387,000.

Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the dollar and support gold.

Meanwhile, investors remained cautious ahead of a European Union summit due to begin later in the day in Brussels.

Hopes that European leaders would make headway on dealing with the crisis dimmed after a German government official indicated that the summit would not result in any detailed decisions and warned against high expectations among investors ahead of the conclusion of the summit on Friday.

Earlier in the week, German Chancellor Angel Merkel reiterated her opposition to the idea of joint euro zone bonds, while EU Economic and Monetary Affairs Commissioner Olli Rehn said Wednesday that the summit would focus on short-term measures to stabilize markets and ease pressure on at-risk countries.

Adding to the negative tone, Italy saw long term borrowing costs rose to 6.19%, their highest level since December, following an auction of 10-year bonds, as investor sentiment on the country continued to deteriorate.

Meanwhile, the yield on Spanish 10-year bonds ticked up to 7%, the level that prompted Greece, Ireland and Portugal to seek international bailouts.

Investors fear one or both countries may need a bailout similar to Greece by the fall.

Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal in recent months. 

A weakening euro and stronger dollar have weighed on gold instead, as the precious metal has been moving in tandem with riskier assets since hitting a record high of USD1,920 last September.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.34% to trade at 83.06, the highest since June 13.

Gold has lost some of its safe haven appeal to the dollar, U.S. Treasuries and German Bunds, partly as a strengthening dollar makes the metal less attractive to buyers holding other currencies.

Elsewhere on the Comex, silver for September delivery plunges 2.69% to trade at USD26.27 a troy ounce, while copper for September delivery fell 0.77% to trade at USD3.330 a pound.

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