Gold futures spike to session high as Draghi speaks

Investing.com - Gold futures rose to the highest level of the day during U.S. morning trade on Thursday, as the U.S. dollar came under heavy selling pressure after European Central Bank President Mario Draghi revealed the ECB was unanimous in its vote to leave interest rates unchanged.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,670.55 a troy ounce during U.S. morning trade, up 0.9% on the day.

Prices rose by as much as 1% earlier in the session to hit a daily high of USD1,672.55 a troy ounce. Gold futures fell to USD1,626.05 a troy ounce on January 4, the lowest level since August 21.

Gold prices were likely to find support at USD1,626.05 a troy ounce, the low from January 4 and near-term resistance at USD1,680.95,the high of December 30.

Speaking at the ECB’s post-policy meeting press conference, Draghi said the ECB was 'unanimous' in its vote to leave euro zone borrowing costs unchanged.

Draghi added that weakness in the euro zone economy will extend into 2013, with a "gradual recovery" taking hold later in the year.

Draghi’s comments came after the ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.

Sentiment on the euro had been buoyed earlier after Spain saw borrowing costs fall sharply at an auction of government debt.

Spain’s Treasury sold EUR5.8 billion worth of debt, above the full targeted amount of EUR5 billion, with the yield on five-year bonds down to 3.99% from 4.20% at an auction last week.

Elsewhere, Italy saw borrowing costs fall to the lowest level since January 2010 at an auction of 12-month government bonds.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.6% to trade at 80.16.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Meanwhile, in the U.S., the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 5 rose by 4,000 to a seasonally adjusted 371,000, compared to expectations for a decline of 2,000 to 365,000.

Jobless claims for the preceding week were revised down to 367,000 from a previously reported 372,000,

Gold traders remained focused on the outlook for Federal Reserve monetary policy, as well as political developments in the U.S.

Gold futures tumbled to a four-month low last week after the minutes from the Federal Reserve’s December meeting indicated that the central bank could end its quantitative easing program earlier-than-expected.

The Fed’s quantitative easing program is viewed by many investors as a major source of liquidity that weakens the U.S. dollar and helps support prices of commodities and other hard assets, including gold.

Focus was expected to remain on the U.S. economy, as investors remained jittery over the longer term fiscal outlook, with negotiations on raising the U.S. debt ceiling still to come in February.

Elsewhere on the Comex, silver for March delivery added 1.5% to trade at USD30.70 a troy ounce, while copper for March delivery rose 1% to trade at USD3.706 a pound.

Copper prices found support after official trade data showed that Chinese exports grew 14.1% from a year earlier in December, blowing past expectations for a 5% gain and up from a 2.9% increase in November.

Imports expanded by 6% from a year earlier, beating expectations for a 3.5% increase and following on from zero growth the previous month.   

The strong rebound in shipments helped widen the trade surplus to USD31.6 billion in December from USD19.6 billion in November.