Gold eased on Tuesday, extending the previous day’s losses as the euro slid against the dollar and European stocks rallied on hopes that Greece would reach a deal with its creditors to stave off default.
Spot gold was down 0.3 percent at $1,181.35 an ounce by 1132 GMT, while U.S. gold futures for August delivery were down $2.70 at $1,181.40.
The metal posted its biggest one-day loss in nearly a month on Monday as a rally in stock markets driven by expectations of a Greek deal sent last week’s rise into reverse.
“It’s always hard to know exactly how much gold prices are being supported by events in Greece, but we definitely saw yesterday that when you take away some of that immediate risk, the risk premium comes out of the market pretty quickly,” Natixis analyst Nic Brown said.
That leaves gold vulnerable to pressure from other elements, he said, such as the prospect of the first U.S. interest rate rise in nearly a decade. That would boost the opportunity cost of holding non-yielding bullion.
“Our bigger-picture view, Greece aside, is that we’re still moving towards a first rate hike from the Fed sometime later this year,” Brown said. “There is scope for further strength in the dollar, and consequently we think there are clear downside risks to gold prices in the near term.”