Gold, silver turn higher as dollar weakens after upbeat euro zone PMI reports

Investing.com - Gold and silver prices rallied off the lowest levels of the session on Thursday to turn sharply higher, as the U.S. dollar weakened broadly after upbeat data on business activity in the euro zone bolstered the outlook for the economic recovery in the region.



On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,246.90 a troy ounce during European morning trade, up 0.65%.



Gold prices fell by as much as 0.6% earlier in the session to hit a daily low of USD1,231.30 a troy ounce, the weakest since January 10.



The February contract settled down 0.26% on Wednesday to end at USD1,238.60. Futures were likely to find support at USD1,227.00 a troy ounce, the low from January 10 and resistance at USD1,262.00, the high from January 21.



Meanwhile, silver for March delivery surged 1.4% to trade at USD20.11 a troy ounce. Comex silver prices slumped by 0.95% earlier to hit a daily low of USD19.64 a troy ounce, the weakest level since January 10.



The March contract ended Wednesday’s session down 0.16% to settle at USD19.83 a troy ounce.



Markit said the euro zone’s composite output index rose to a 31-month high of 53.2 in January, up from a final reading of 52.1 in December, as growth picked up in Germany and the rate of decline eased in France.



The preliminary reading of the euro zone’s manufacturing purchasing manager’s index rose to a 32-month high of 53.9 from 52.7 in December. Analysts had expected the index to rise to 53.0.



The region’s services PMI advanced to a four-month high of 51.9 from 51.0 in December, compared to forecasts for a reading of 51.4.



Manufacturing activity in Germany expanded at the fastest pace since May 2011 this month. Germany’s manufacturing PMI rose to 56.3 in January from a final reading of 54.3 in December. Analysts had expected the index to tick up to 54.6.



The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.5% to trade at 80.92, the lowest since January 16.



Dollar weakness usually benefits gold and silver, as it boosts the metals’ appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.



Investors awaited key U.S. economic data later in the day for further indications on the strength of the economy and the future course of monetary policy. The U.S. is to release the weekly report on initial jobless claims later in the day as well as a private sector report on existing home sales.



Gold and silver prices have been under pressure in recent sessions amid expectations that the Federal Reserve will continue tapering its stimulus program at the outcome of its next policy meeting on January 29 to USD65 billion from the current USD75 billion.



Elsewhere on the Comex, copper futures for March delivery fell 0.7% to trade at a one-week low of USD3.314 a pound.



Data released earlier showed that China’s HSBC Flash Purchasing Managers Index, the earliest indicator of the country's industrial activity, fell to a six-month low of 49.6 in January from a final reading of 50.5 in December.



China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.