Gold price pares earlier gains amid Chinese rally, Greek proposal revisions
San Francisco (July 9) Gold futures fell mildly on Thursday amid a stronger dollar, as equities markets in China rallied sharply and top officials in the euro zone continued to prepare for Sunday's critical summit with Greece in Brussels.
On the Comex division of the New York Mercantile Exchange, gold for August delivery fell 3.60 or 0.31% to $1,159.90 a troy ounce. Gold reached a peak of $1,166.80 in U.S. morning trading before paring the gains late in the session. After touching down to a four-month low earlier in the week, the precious metal rallied on Wednesday posting one of its best one-day gains over the last six weeks..
In China, the Shanghai Composite Index rebounded from Wednesday's collapse gaining more than 5.75% in its strongest one-day move since March, 2009. A wide range of regulations from the People's Bank of China aimed at curtailing selling spurred a rally in large-cap stocks, as the Shanghai stock exchange 50 gained more than 6% on the session. Previously, Chinese equities had crashed more than 25% over the last month erasing approximately $3.5 trillion from stocks in its benchmark index.
China is the world's largest producer of gold and the second-largest consumer of the precious metal behind India.
Elsewhere, Greek leaders scrambled to finalize a proposal required to unlock critical aid from its troika of creditors before Thursday night at Midnight. Various reports from Greek media outlets indicate that the proposal could include tax hikes and spending cuts of up to €12 billion – an amount higher than previously anticipated. During a visit to Bosnia on Thursday, Germany chancellor Angela Merkel reiterated that a haircut or partial forgiveness on billions owed by Greece in debt should remain off the negotiating table.
“In 2012 we dealt with the issue of debt sustainability. We stretched out the maturities, we pushed back the repayment requirement for EFSF loans out to 2020. So we are not dealing with debt sustainability for the first time,” Merkel said. “I have said that a classic haircut is out of the question for me and that hasn’t changed between yesterday and today.”
Gold is viewed as a safe-haven for investors in periods of severe economic instability.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained 0.46% to 96.82 in spite of higher than anticipated U.S. initial jobless claims last week.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery rose 0.205 or 1.35% to 15.365 an ounce.
Copper for September delivery gained 0.048 or 1.93% to 2.536 a pound.