Gold price rebounds on softer dollar, focus on Greek vote

London (July 3)   Gold prices firmed on Friday, rebounding from a three-and-a-half-month low as the dollar softened after weaker than forecast US employment data tempered expectations for a September rate rise by the US Federal Reserve.

Investors remained cautious ahead of Greece’s referendum on an international bail-out deal at the weekend, while liquidity should remain thin throughout the day as US markets are closed for Independence Day.

Spot gold gained 0.2% to $1,168.04 an ounce by 10am GMT. The metal fell to $1,156.85 on Thursday, its lowest since mid-March, ahead of the release of US non-farm payrolls, as the market had positioned itself for a positive number.

It then pared losses as the dollar fell against a basket of currencies after the data showing jobs growth were weaker than expected last month.

"Judging from how gold fell ahead of yesterday’s US data, the bias in the gold market is clearly to the bearish side," Julius Baer analyst Carsten Menke said.

Before the data, there had been strong expectations the Fed would raise rates for the first time in nearly a decade in September, given recent strong numbers on consumer spending and housing.

Gold has been under pressure this year from uncertainty over the timing of any rate increase as raising them could boost the dollar further and dent demand for non-interest-paying bullion.

For the week, gold was still heading for a 0.5% fall, adding to a 2% weekly loss previously, mostly as a result of gains in the dollar against the euro as the Greek debt crisis unfolded.

Uncertainty around Greece as yet has failed to trigger strong retail demand for gold, often perceived as a safe haven.

"The gold market is pretty relaxed about Greece but I think a ‘No’ in the polls could cause some upside volatility," Mr Menke said.

The Greek government has called a referendum on Sunday after five months of acrimonious talks with its official creditors over an aid-for-reforms deal broke down without a deal.

Silver fell 0.3% to $15.64/oz, while platinum dropped 0.2% to $1,079.74 and palladium was down at $688.47.

Source: Reuters