Gold futures found ground in electronic trading on Friday, after tumbling to a two and half year low in the previous session. A modest easing in the U.S. dollar helps the yellow metal’s price to stabilize.
Gold for August delivery advanced nearly 1%, to trade at $1,299.50 an ounce.
The contract lost more than 6% during Thursday’s floor trade on the New York Mercantile Exchange. Investors continued to price in the Federal Reserve’s possible trimming of its monetary stimulus later this year. However, some traders now consider the current gold price level as a buying opportunity.
After settling Nymex trade at $1,286.20 an ounce, gold took further damage on news exchange operator CME Group is increasing margin requirements.
The CME, which owns the Nymex’s metals-trading Comex division, announced following Thursday’s close that it would rise initial and maintenance margins for gold by 25%.
The increase means speculative traders must have $8,800 to open a 100-troy-ounce position, up from $7,040, and keep $8,000 to hold the contract overnight, up from $6,400. Whatever the effect of this announcement may be, it would be very much likely short-lived.
The new margins would come into effect after Friday’s close, CME said. Still speculative traders would have the weekend to reposition.
Gold futures are recovering some ground at present during East Asia trading hours, as the U.S. dollar stopped its advance, tipping slightly lower.
By late morning in East Asia, the ICE dollar index had edged down to 81.642 from its 81.823 level late Thursday. The dollar had rallied since the Federal Reserve’s statement late Wednesday.
A weaker U.S. currency tends to support gold and other dollar-denominated commodities, as it makes them less expensive for holders of euros, yen and other units.
Traders scramble to sell gold, as prices fall to lowest level in nearly three years.
On the upside, $1,350 is likely to turn into resistance, having provided support before.
Silver price continues to decline. The modest retracement for gold failed to lift the metal’s price, with July silver giving up another 21 cents, or 1.1%, to $19.61 an ounce, after dropping $1.80 on Thursday.
