Investing.com - Gold prices rose in U.S. trading on Wednesday as an ongoing political stalemate in Italy preventing the creation of a coalition government there sent investors selling the euro and running to gold in search of safety.
Gold often serves as a hedge to weakening paper currencies, the euro most lately.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery were up 0.58% at USD1,606.55 a troy ounce in U.S. trading on Wednesday, up from a session low of USD1,591.95 and down from a high of USD1,608.35 a troy ounce.
Gold futures were likely to test support USD1,590.85 a troy ounce, Monday's low, and resistance at USD1,614.40, Monday's high.
In Italy earlier, the head of the center-left alliance, Pier Luigi Bersani, ruled out forming a coalition any time soon.
Election results in February resulted in a political deadlock in the Senate, fueling fears that the leadership stalemate may drag on and undermine economic reforms.
Investors are taking note.
Italy's Treasury earlier sold a total of EUR6.91 billion in 5- and 10-year government bonds, within the targeted range of EUR5-7 billion.
Italy auctioned EUR3 billion in 10-year government bonds at an average yield of 4.66%, down from 4.83% at a similar auction last month, though turnout was light.
Rome also sold EUR3.91 billion of a new line of five-year bonds at an average yield of 3.65%, up from 3.59% in a February auction.
Yields in secondary markets rose, however, as investors priced in political uncertainty.
Elsewhere, the European Commission reported earlier that its eurozone Economic Sentiment Indicator fell to 90.0 in March from 91.1 in February.
Analysts were expecting the index to fall to 90.4 last month, which further weakened the euro and bolstered gold's appeal as did lingering concerns surrounding the terms tied to Cyprus's recent bailout.
Cyprus recently gained access to EUR10 billion in rescue funding arranged by the country's European neighbors and the International Monetary Fund provided the country's second-largest lender, Laiki Bank, closes.
The deal guaranteed that accounts holding EUR100,000 or less will continue to be insured and likely shifted to another financial institution, though the fates of larger accounts remained up in the air, with depositors and bondholders facing heavy losses.
Fears that future eurozone bailouts may call for similar actions continued to repel investors away from the single currency on Wednesday.
Elsewhere on the Comex, silver for May delivery was down 0.28% at USD28.598 a troy ounce, while copper for May delivery was down 0.01% and trading at USD3.442 a pound.
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