Gold price slips on dollar, equities strength
London (Jun 22) Gold eased on Monday as the dollar rose and as European equities jumped on possible signs of progress in Greek debt talks, which curbed safe-haven demand for the metal.
Spot gold had slipped 0.5% to $1,193.56 an ounce by 9.40am GMT, about 1% below its highest level since May 26 at $1,205.50 hit last week after a dovish US Federal Reserve message on the timing of a US interest rate rise.
Gold is typically regarded as a good bet in times of financial and economic uncertainty. But traders have seen modest demand for the metal over the past few days from investors concerned about the Greek debt crisis.
"It is difficult to call on Greece, we haven’t seen much buying above $1,200 and wider financial markets are hopeful that there will be a last-minute solution that will avoid a Greek default," Societe Generale analyst Robin Bhar said.
"If a deal is reached, then we’ll see further sell-off in precious metals."
Greek Prime Minister Alexis Tsipras will meet the heads of the European Commission, European Central Bank and International Monetary Fund on Monday ahead of a summit of eurozone leaders later in the day aimed at reaching a deal over debt talks.
The dollar rose 0.2% versus a basket of leading currencies, while European equities climbed 2% ahead of the meeting, reducing investors’ interest for assets perceived as safe such as gold and bonds.
Hedge funds and money managers lowered net long positions in gold and slashed bullish bets on silver to the lowest level in seven months in the week ended June 16.
The positioning reflects the stance of investors before a US Federal Reserve meeting last week, when policymakers said a rate increase would be appropriate only after further improvement in the labour market and with greater confidence that inflation would rise. Prices rose following those comments.
Non-interest-paying gold has benefited from record-low interest rates following the 2007-09 financial crisis. Higher rates would increase the opportunity cost of holding the metal.
"(Fed chairwoman Janet) Yellen’s comments including the need for decisive evidence, as well as the heightened uncertainty surrounding Greece, have limited the downside risk for gold in the absence of physical demand," Barclays said in a note.
The absence of top consumer China, which is shut for a public holiday, also hurt gold, traders said.
Market players were also monitoring gold sector wage talks, that are due to start on Monday.
Platinum fell close to a six-year low hit last week, down 1.1% at $1,071.74/oz. Silver was up 0.5% at $16.13/oz, while palladium fell to a 16-month low of $696.74/oz.