Gold prices fall in Asia over upbeat U.S. trade deficit

Gold futures continued to trade lower on Wednesday after official data showed that the U.S. trade deficit narrowed to a four-year low in November, which bolstered the dollar by fanning speculation that the recovery will remain strong enough to prompt the Federal Reserve to continue withdrawing support through 2014.
Gold prices fall in Asia over upbeat U.S. trade deficit

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 traded at USD1,228.80 a troy ounce during Asian trading, down 0.07%. On Tuesday, gold prices held in a tight range between USD1,228.50 a troy ounce and USD1,231.70 a troy ounce.

The February contract settled down 0.05% at USD1,238.00.

Futures were likely to find support at USD1,227.50 a troy ounce, Tuesday’s low, and resistance at USD1,231.70, Tuesday’s high.

Demand for the greenback jumped after the Commerce Department said the U.S. trade deficit narrowed to USD34.25 billion in November from a revised deficit of USD39.33 billion in the previous month.

Economists were expecting the U.S. trade deficit to widen to USD40 billion.

U.S. exports rose 0.9% to a record high of USD194.9 billion, while imports fell 1.4% to USD229.1 billion.

Investors applauded the data, which weakened gold, but remained cautious ahead of the release of the Federal Reserve’s December meeting minutes on Wednesday as well as Friday’s U.S. December jobs report, with many eager to see fresh indications on the possible timing of further Fed stimulus tapering.

The Federal Reserve is currently buying USD75 billion in Treasury holdings and mortgage debt a month to spur recovery by suppressing long-term borrowing costs, which weakens the dollar as a side effect.

Talk of cuts to the stimulus program tends to bolster the dollar and weaken gold.

Monetary authorities have said they’ll pay close attention to economic indicators when deciding the fate of stimulus measures.

Meanwhile, silver for March delivery was up 0.04% to trade at USD19.795 a troy ounce, while copper futures for March delivery were down 0.03% and trading at USD3.359 a pound.