Gold price slips as Greek crisis strengthens dollar

London (July 6)  Gold fell as Greek voters’ rejection of austerity strengthened the dollar, diminishing the appeal of the metal that’s sometimes bought as a haven. Silver, platinum and palladium declined.

Greeks voted in a weekend referendum to reject further measures required to win another bailout, spurring speculation the country will be forced to quit the euro zone. Bullion failed to hold onto earlier gains as the Bloomberg Dollar Spot Index reached the highest in almost a month.

Gold traders will look past Greece and focus on the dollar and the outlook for higher U.S. interest rates, according to Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam. Higher borrowing costs curb gold’s allure because it doesn’t pay interest or give returns like other assets such as bonds and equities.

“The strength of the dollar as a haven continues, and investors may look beyond Greece to Fed rate action,” said George Gero, vice president of global futures at RBC Capital Markets in New York. “This may be a headwind for gold.”

Gold for immediate delivery lost 0.3 percent to $1,164.84 an ounce by 9:25 a.m. in London, according to Bloomberg generic pricing. It rose as much as 0.6 percent in early Asian trade. Futures for delivery in August were little changed at $1,164 an on the Comex in New York.

Just 39 percent of Greeks voted “yes” to the creditors’ demands for further spending cuts and tax increases, according to results on the Greek Interior Ministry website. German Chancellor Angela Merkel and French President Francois Hollande called for an emergency leaders’ summit on Tuesday. The pair will first meet Monday in Paris to discuss Europe’s next move.

Fed Rates

“The lack of influence that the euro crisis is having on gold is particularly noteworthy,” Barclays Plc said in a report on Monday. Gold’s main role at present is as a proxy for the timing and likelihood of a Fed rate increase, the bank said.

The Bloomberg Dollar Spot Index added 0.1 percent, after reaching the highest since June 8. It rose 18 percent in the past year on prospects for the first U.S. rate increase since 2006. Gold fell 1.7 percent this year, while bullion priced in euros is up 7.5 percent.

The standoff in Greece hasn’t sparked much demand for gold, which is traditionally seen as a store of value amid crises. The metal fell in the past four quarters in the longest slump since 1997. Holdings in bullion-backed exchange-traded products fell 5.4 percent since this year’s peak in late-February and are near the lowest in six years, data compiled by Bloomberg show.

Silver for immediate delivery lost 0.4 percent to $15.631 an ounce in London. Platinum slipped 1.6 percent to $1,065.35 an ounce, while palladium retreated 1.6 percent to $674.90 an ounce. It reached a two-year low last week.

Source: Mineweb