Gold futures edge higher, muted demand in India limits gains

Investing.com - Gold futures were mildly higher during early European trade on Thursday, as sharp losses in the previous two trading sessions created bargain buying opportunities for investors reluctant to bet prices will fall further.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,664.65 a troy ounce during early European morning trade, adding 0.25%.      

It earlier rose by as much as 0.35% to trade at a session high USD1,666.85 a troy ounce.

Gold futures were likely to find support at USD1,627.75 a troy ounce, the low from March 22 and short-term resistance at USD1,699.55, the high from March 27.

Gold prices lost nearly 2.5% in the two sessions leading up to Thursday as a failure to break above a key resistance level close to USD1,700 an ounce earlier in the week prompted some selling from technical traders amid bearish chart signals.
 
However, the two-day drop triggered some bargain buying from traders reluctant to bet that prices would fall further amid expectations for a third round of monetary easing by the Federal Reserve.

Prices were boosted earlier in the week after Fed chief Bernanke said that “continued accommodative policies” are needed to bring about big gains in the U.S. jobs market, which he described as “far from normal,” despite a recent improvement.

Markets interpreted the comments as an indication the central bank will maintain its ultra-loose monetary policy and reinforced the view that further easing from the central bank may be possible.

Gold traders were awaiting a U.S. government report on initial jobless claims later in the day as well as revised data on gross domestic product to further asses the strength of the U.S. economy and the need for further monetary easing to help boost growth.

Gold traders were also turning their attention to Friday's summit of euro zone finance ministers in Copenhagen, meeting to discuss running the region’s EUR500 billion permanent bailout fund, the European Stability Mechanism, in conjunction with EUR200 billion from the region’s temporary fund.

Spain’s debt problems were also on investors’ minds as a major general strike got underway, protesting austerity moves by the government.

Meanwhile, gold traders continued to monitor developments surrounding a nationwide strike by bullion and jewelry dealers in India, which has led to muted demand on the physical market in New Delhi over the past two weeks.

India's Finance Minister said on Tuesday the country will not cut import duty on gold, which it doubled to 4% this month, although it is considering jewelers' demands for the removal of a 0.3% excise duty on unbranded jewelry.

HSBC Holdings said in a report earlier that, "The removal of the excise tax may be a step towards meeting some of the grievances listed by Indian jewelers in the wake of the government budget."

"Until the Indian jewelers reopen their shops, Indian gold demand will remain weak. The dip in Indian demand may be partly offset by better Chinese physical demand as Shanghai premiums remain high."

Most Indian jewelry and gold shops have remained closed since March 18 after the country announced a 4% import duty hike on gold and a 0.3% excise tax on most gold jewelry.

According to local traders, imports could decline by as much as 35% in 2012 from a record 969 tonnes a year earlier, while the industry might face more difficult time in coming days as marriage season begins.

India is the world's top gold consumer.

Elsewhere on the Comex, silver for May delivery eased up 0.1% to trade at USD32.63 a troy ounce, while copper for May delivery fell 0.75% to trade at USD3.851 a pound.