Gold prices rebound in Asia as investors eye Fed on rates, Greece debt

Investing.com - Gold prices rebounded mildly in Asia on Wednesday from an overnight plunge with the scope for the Federal Reserve to raise interest rates sooner than expected this year and Greece's debt woes also weighing on the outlook.

On the Comex division of the New York Mercantile Exchange, gold for June delivery rose 0.16% to $1,208.60 a troy ounce.

Elsewhere, silver for July delivery gained 0.14% to $17.095 a troy ounce. Copper for July delivery fell 0.02% to $2.834 a pound.

In Japan first quarter GDP rose 0.6% for an annualized pace of 2.4%, outstripping expectations of an 0.4% gain quarter-on-quarter and for a year-on-year pace of 1.5%.

Economists expect GDP to continue growing in the second quarter. The average economist forecast for second quarter GDP is an annualized 2.26%, according to the latest monthly ESP Survey of 40 economists by the Japan Center for Economic Research conducted from April 28 to May 7.

However, Economic and Fiscal Policy Minister Akira Amari said after the release that weakness in the global economy remained a threat to sustained growth

Overnight, gold futures plummeted on Tuesday experiencing its sharpest loss on the month, amid a stronger dollar and indications that the European Central Bank is likely to ramp up its quantitative easing program during the summer.

Following a treacherous winter, realtors are welcoming a prosperous spring housing surge. New residential construction for the month of April soared to its highest level since 2007, bolstered by a spike in multi-family starts.

The U.S. Department of Commerce said Tuesday that housing starts last month surged more than 20% for the month to 1.135 million, one of its highest on record. The reading far exceeded the high end of analysts' forecasts, which hovered in a range of 0.97 to 1.120 million.

Similarly, the number of new U.S. housing permits soared last month by more than 10% to 1.143 million representing its largest gain in more than seven years. Permits for multi-family units rose by 20.5% to 0.477 million, while multi-family starts swelled by more than 25% to 0.402 million. It was also a strong month for single-family starts, which expanded by 16.7% on the month and 14.7% year-over-year to 0.733 million.

As a result, the dollar extended gains from one session earlier by jumping more than 1% on Tuesday. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 1.1% in U.S. morning trading to an intraday high of 95.55 its highest level in more than two weeks.

A sell-off in the dollar since the end of April enabled gold to reach a three-month high at 1,227.70 last week. Dollar-denominated commodities such as gold are more expensive for foreign purchasers in periods of a stronger dollar.

In Europe, the euro plunged on Tuesday following market-moving comments by European Central Bank member Benoît Coeuré on front-loading the bank's aggressive bond buying program over the next several months. Speaking at the Imperial College Business School/Brevan Howard Centre for Financial Analysis in London, Coeuré said Monday night that the ECB will increase its purchase of European Asset-Backed Securities in May and June to offset a seasonal lack of liquidity.

Coeuré emphasized the additional stimulus measures are related more to seasonal market conditions than the recent sell-off of government bonds in the euro zone.

"We are also aware of seasonal patterns in fixed-income market activity with the traditional holiday period from mid-July to August characterized by notably lower market liquidity," Coeuré said during the speech.

"If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again. The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility."

A successful quantitative easing program in the euro zone is widely viewed as bearish for gold. The €1.1 trillion initiative is intended to stimulate corporate borrowing and economic expansion but is not expected to drive interest rates lower.