Gold futures held steady on Wednesday after the dollar cooled its rally due to profit taking amid safe-haven demand for the yen, though uncertainty in Europe sent the yellow metal dipping into negative territory during afternoon trading on concerns the dollar may rise in the near future.
Gold and the dollar tend to trade inversely with one another.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 0.37% at $1,227.40, up from a session low of $1,225.70 and off a high of $1,238.90.
The February contract settled up 3.10% at $1,232.00 on Tuesday.
Futures were likely to find support at $1,186.40 a troy ounce, Friday’s low, and resistance at $1,239.00, Tuesday’s high.
The yen rose on jitters over the outlook for China’s economy after Beijing set new restrictions on collateral for short-term loans, which weakened the greenback earlier and gave gold a boost.
The move fueled fears that the China may grow less than anticipated, which fueled safe-haven yen positions that came at the greenback’s expense.
The yen often rises when Japanese stocks fall and growth-sensitive Australian and New Zealand dollars slide.
Still, the dollar’s losses were seen as limited due to a surprise decision by the Greek government to bring forward a parliamentary vote for president to next week from February.
Markets were spooked by the risk of snap elections, which could take place if Prime Minister Antonis Samaras’s candidate is not approved by parliament, which could see the anti-bailout Syriza party take power.
Still, gold held somewhat steady albeit off earlier highs as investors awaited fresh U.S. data.
Last week’s strong U.S. jobs report for November prompted investors to bring forward expectations for the first hike in interest rates to mid-2015 from September 2015 ahead of the data.
The Labor Department reported Friday that the U.S. economy added 321,000 jobs in November, well past expectations for a 225,000 reading.
Investors were looking ahead to next week’s policy statement from the Fed amid speculation that policymakers could drop an assurance that interest rates will stay low for a “considerable time.”
Elsewhere, silver for March delivery was down 0.09% at $17.118 a troy ounce, while copper futures for March delivery were down 1.17% at $2.893 a pound.
