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Gold drops as investors show concern about global economy

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Investing.com - Gold prices dropped in Asian trading on Tuesday as investors showed concern that a budgetary impasse in the U.S. could weigh on global economic growth.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 0.10% at USD1,667.85 a troy ounce in U.S. trading, up from a session low of USD1,666.25 and down from a high of USD1,669.05 a troy ounce.

Gold futures were likely to test support at USD1,654.55 a troy ounce, the low from Friday, and resistance at USD1,678.05, Thursday's high.

On Monday, President Obama held a press conference in the U.S. to address the nation's debt ceiling. According to U.S. law, there is a self-imposed borrowing limit on the country. Since its imposition around the first World War, the U.S. has raised its debt ceiling numerous times as the country's national debt load has slowly expanded.

The U.S. reached its debt limit back in December, however, through deft maneuvering, the Treasury Secretary Timothy Geithner was able to keep spending levels at their prescribed amount without resorting to further borrowing.

However, Geithner has said that the tricks will run out in late February, at which point the U.S. could enter a period of technical default.

Such default could wreck havoc on the market and spark fears of deflation. As gold trades largely on expectations of future deflation, any concerns of deflation could hurt the price of the yellow metal.

In addition to the debt ceiling debate, data released early on Tuesday suggested that the European economy may be worse than believed, further contributing to deflationary fears.

Industrial production for the Eurozone dropped 0.30%, worse than the 0.10% economists had anticipated.

Meanwhile on the Comex, silver for March delivery was down 0.31% and trading at USD31.015 a troy ounce, while copper for March delivery was up 0.11% and trading at USD3.647 a pou

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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