Gold eases higher on weak U.S. data, euro zone worries

Investing.com - Gold futures traded slightly higher Thursday, bouncing off a two-week low, as markets continued to be wary of developments surrounding Spain’s fiscal health.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,640.35 a troy ounce during late U.S.  trade,  easing higher by 0.05%.      

It earlier fell by as much as 0.6% to trade at USD1,631.45 a troy ounce, the lowest since April 5.

Gold futures were likely to find long-term support at USD1,613.55 a troy ounce, the low from April 4 and resistance at USD1,681.15, the high from April 12.

The precious metal plunged to the lowest levels of the session in the aftermath of a closely-watched Spanish debt auction earlier in the day.

Spain’s Treasury sold EUR1.116 billion worth of two-year government bonds at an average yield of 3.463% earlier in the day, up sharply from 2.069% at a similar auction last month.

The country also sold EUR1.425 billion of ten-year debt at an average yield of 5.743%, up from 5.338% at a similar auction last month. It was the highest yield in five months.

The results failed to ease concerns over the outlook for Spain, as Prime Minister Mariano Rajoy's government attempts to reduce one of the largest deficits in the euro zone, amid fears that the economy is entering a recession.

Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.

There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.

Market chatter of an imminent French sovereign debt downgrade also added to the gloomy trade environment.  

Traders said unfounded rumors of a possible downgrade of France's sovereign debt rating triggered a sharp selloff in French government bonds and added to losses for peripheral euro zone bonds, while pushing the U.S. dollar to the highest levels of the day against the euro.

However, ratings agency Fitch later reaffirmed its triple-A rating on the country, while a senior French government official added that there was no new information on the country’s rating.

Gold prices moved higher following the release of a report showing the number of people who filed for unemployment assistance in the U.S. last week rose to the highest level since January.

In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending April 14 fell by 2,000 to a seasonally adjusted 386,000, disappointing expectations for a decline of 18,000 to 370,000.

The previous week’s figure was revised up to 388,000 from 380,000.

Jobless claims have remained below 400,000, a level historically associated with an improving labor market, in 23 of the past 25 weeks, though lately claims have been pushing higher from the 350,000 associated with above-average job growth. 

Gold prices have been stuck in a narrow trading pattern in recent days, as investors search for the next catalyst to take prices higher.

Elsewhere on the Comex, silver for May delivery rose 0.60% to trade at USD31.67 a troy ounce, while copper for May delivery gave back 0.28% to trade at USD3.621 a pound.