Gold price falls on higher dollar ahead of eurozone summit on Greece
London July 7) Gold fell on Tuesday as the dollar rose and investors assessed a further fall in Chinese shares and awaited an emergency eurozone summit on Greece as the country’s banks face potential collapse.
Gold, usually seen as an alternative investment in times of financial and economic uncertainty, has so far failed to see significant safe-haven buying due to the continuing Greek crisis as fears of contagion seem to be limited, traders said.
Spot gold eased 0.3% to $1,166.16 an ounce by 9.45am GMT, while US gold futures dropped 0.5% to $1,166.90/oz.
Prices are within reach of the three-and-a-half-month low of $1,156.85 hit on Thursday. Initial support is in the $1,160-$1,165 area, followed by the year low of $1,142.90, MKS Group said in a note.
"I find it difficult to see a significant move to the upside for gold because I would not know where the spark would come from," said Gerhard Schubert of SC Consultancy DMCC.
"But it’s already all in the price, anybody who wanted to be long because of Greece and short because of the Fed’s rate policy would already have done so."
Hedge funds and money managers increased their short positions to the highest on record in the week ended June 30, the US Commodity Futures Trading Commission data showed on Monday. Non-commercial dealers boosted their short positions to a two-year high.
In recent days, the weakness in the euro from the Greek crisis has supported the dollar, which rose to a one-month high against a basket of leading currencies on Tuesday.
In wider markets, Chinese equities failed to benefit from policy measures at the weekend intended to halt a slide of almost 30% since mid-June.
Gold’s upside has also been hurt by the prospect of higher US interest rates later this year, which would boost dollar demand and increase the opportunity cost of holding the metal.
For now, the focus remains on the eurozone meeting. Athens is expected to bring a proposal for a deal to the summit after France and Germany told Greece on Monday to come up with serious proposals to restart financial aid talks.
The European Central Bank left emergency liquidity for Greek banks at current levels but increased the haircuts on the collateral it demands.
Platinum was down 1% at $1,051.25/oz, having dropped to its lowest since March 2009 at $1,043.50/oz on Monday.
Silver was down 0.8% at $15.60/oz and palladium fell 0.1% to $676.75/oz, close to a two-year low hit last week.