Investing.com - Gold futures eased off a two-week high during European morning trade on Thursday, as concerns over further budgetary battles facing the U.S. came into focus.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,684.15 a troy ounce during European morning trade, down 0.25% on the day.
Prices fell by as much as 0.3% earlier in the session to hit a daily low of USD1,683.35 a troy ounce. Gold futures hit USD1,695.35 a troy ounce on Wednesday, the strongest level since December 18.
Gold prices were likely to find support at USD1,654.15 a troy ounce, the low from December 28 and near-term resistance at USD1,704.35, the high from December 18.
Market sentiment was boosted Wednesday after U.S. lawmakers passed a compromise bill to avoid the fiscal cliff, blocking a series of looming tax increases and spending cuts that could have pushed the U.S. economy back into a recession.
However, investors remained jittery over the longer term outlook, with negotiations on raising the U.S. debt ceiling still to come in February.
Rating agency Moody's said Wednesday that avoiding the fiscal cliff was only the first in a number of steps needed to ensure that the U.S. kept its coveted triple-A rating.
Meanwhile, Standard & Poor's, which downgraded the U.S. to AA+ from AAA in August 2011, said the deal had done little to alter the country's negative credit outlook.
A stronger U.S. dollar weighed on the precious metal. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.25% to trade at 80.11, the strongest level since December 12.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Gold traders are now looking ahead to Friday's highly-anticipated data on U.S. nonfarm payrolls, as investors attempt to gauge the strength of the country's economic recovery.
Any improvement in the U.S. economy could scale back expectations for further easing from the Federal Reserve.
Elsewhere on the Comex, silver for March delivery dipped 0.2% to trade at USD30.94 a troy ounce, while copper for March delivery eased up 0.1% to trade at USD3.737 a pound.
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