Gold Falls Awaiting Greek Deal News

Gold edged lower on Wednesday as the dollar pared earlier losses versus the euro, while traders took to the sidelines to await news on Greece’s negotiations with its international lenders to avoid default.

The precious metal has declined for the last three days as the dollar strengthened, and as optimism over the prospects for a deal on Greece prompted investors to favour assets seen as higher risk, such as stocks.

Gold edged higher in earlier trade as both stocks and the dollar retreated, but failed to maintain momentum as those assets recovered from lows. Prices fell to their lowest since June 8 at $1,171.21.

Spot gold was at $1,174.09 an ounce at 1400 GMT, down 0.3 percent, while U.S. gold futures for August delivery were down $2.80 an ounce at $1,173.80.

“Gold continues to struggle with multiple headwinds,” Saxo Bank head of commodity research Ole Hansen said. “But we have nevertheless managed to find some support towards $1,170. We can probably expect the range bound nature will continue for now.”

“Industrial metals and platinum seems to be on the mend and that may indirectly provide some support,” he added.

European stocks fell on Wednesday as the anxious wait for fresh talks aimed at averting a Greek default left the markets vulnerable to sudden moves.

Time is running out before the June 30 deadline when Greece has to repay 1.6 billion euros ($1.8 billion) to the International Monetary Fund, or face default.

The euro was up 0.1 percent against the dollar, but remained well off earlier highs and close to the previous session’s two-week low, when the single currency posted its biggest one-day loss since mid-March.

Speculation that the Federal Reserve will raise rates for the first time in nearly a decade has weighed on gold prices this year. Higher rates lift the opportunity cost of holding non-yielding bullion, and benefit the dollar.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza