Gold trades higher on euro zone fears, strong dollar

Forexpros - Gold futures traded higher Wednesday despite a strong U.S dollar on weak euro zone manufacturing data, while concerns over Greece’s financial woes persisted.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,771.05  a troy ounce during late U.S. trade, climbing 0.71%.      

It earlier fell by as much as 0.55% to trade at a session low USD1,750.85 a troy ounce.

Futures were likely to find support at USD1,732.35 a troy ounce, Tuesday’s low and technical resistance exists at  USD1,785.74, the high from November 15.

Gold gained despite as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, climbing 0.16% to trade at 79.30.

A stronger U.S. dollar usually weighs on gold, as it decreases the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Preliminary data released earlier showed that manufacturing activity in the euro zone improved less-than-expected in February, remaining in contraction territory for the seventh consecutive month.

Data from Germany and France showed modest growth in business activity, albeit at a slower pace than in January, but activity in peripheral euro zone nation’s showed a steep decline this month.

Markets were also jittery after Fitch Ratings cut Greece’s credit rating to C from CCC and reiterated that a bond-swap agreement with private creditors would be a restricted default.

Fitch said it would review its stance on Greece again once the debt swap had been completed.

The downgrade comes after euro zone finance ministers approved a second bailout package for the debt-laden country, adding to uncertainty over Greece’s ability to implement strict austerity measures in compliance with its new bailout deal.

While gold is traditionally viewed as a safe haven, the metal has been tracking riskier assets in the past few months as the turmoil caused by the euro zone debt crisis forces investors to sell their profitable gold positions to cover losses elsewhere.    

Elsewhere on the Comex, silver for March delivery tumbled 0.38% to trade at USD34.30 a troy ounce, while copper for March delivery eased higher by 0.03% to trade at USD3.84 a pound.