Investing.com - Gold prices dropped in Asian trading on Wednesday as investors sold on fears of global uncertainity and speculation that U.S. corporate earnings could be weak. Both factors could decrease the probability of global inflation, which would hurt gold prices. The precious metal is traditionally viewed as an inflation hedge.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 0.15% at USD1,659.65 a troy ounce in U.S. trading, up from a session low of USD1,657.55 and down from a high of USD1,661.45 a troy ounce.
Gold futures were likely to test support at USD1,654.05 a troy ounce, a low from Tuesday's session, and resistance at USD1,693.15, last Wednesday's high..
Gold has been trading in a fairly tight range in recent days, and in a slightly looser range in recent weeks. Gold was trading near $1800 per troy ounce back in early October, but has been steadily dropping in price since.
In mid-December, the Federal Reserve in the U.S. stated that it would tie its interest rate policy to the rate of unemployment. Since then, gold has traded right around $1,660 a troy ounce.
On Tuesday, data on the employment situation in the Eurozone indicated that the economy of the region may be stabilizing. Eurozone unemployment came in at 11.8%, right inline with economists' expectations. However, the figure was worse than the previous 11.7%.
The European economy doesn't appear to be getting significantly worse. Yet, at the same time, it still appears sluggish.
Without economic growth, inflation is likely to remain subdued around the globe for some time. If inflation does not pick up, gold prices are likely to remain supressed.
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