Gold price slips as Greek crisis knocks euro
London (Jun 30) Gold prices fell on Tuesday as the prospect that Greece will default on a repayment to the International Monetary Fund (IMF) knocked the euro, and as investors remained wary over the metal’s longer-term prospects. Greece is just hours away from defaulting on a €1.6bn loan from the IMF.
Talks with creditors broke down over the weekend, with Prime Minister Alexis Tsipras calling for a bail-out referendum on July 5. Spot gold was down 0.4% at $1,174.67 an ounce at 9.44am GMT, while US gold futures for August delivery were down $4.70/oz at $1,174.30.
For the month, spot prices are headed for a 1% decline. The metal, which often benefits in times of financial market turmoil, found little support from safe-haven bids.
While eurozone stocks, low-rated bonds and the euro weakened as Greece looked set to default, there was little evidence of panic, with investors pointing to Europe’s improved ability to fight financial contagion since the height of the euro debt crisis in 2011.
"There is still confidence that there will be a deal at the last minute, and if that is not the case, that the ECB (European Central Bank) will step in and make sure there is no contagion," ABN Amro analyst Georgette Boele said. "The dollar is doing relatively well this morning," she added.
"That’s having more of an impact on precious metals, especially gold and silver."
Gold has been weighed down this year by expectations the US Federal Reserve is gearing up to raise US interest rates for the first time in nearly a decade, lifting the opportunity cost of holding non-interest-paying bullion.
The fallout from Greece in the US is expected to be modest and not enough to throw the Fed’s likely September rate increase off course, former Fed officials and analysts said. "US monetary policy will remain a key gold price driver," Bank of America Merrill Lynch said in a note.
"The upcoming rate hike — our base case is that the Fed will tighten in September — should make a sustained gold price rally unlikely in the coming weeks."
Silver was down 0.5% at $15.67/oz, platinum was up 0.3% at $1,080.30/oz, and palladium was up 1% at $672/oz.