Gold Retraces on Greek Gains After Weaker Euro

Gold steadied on Monday, giving up early gains as the prospect of a Greek debt default, which hit European shares, was offset by a strengthening dollar and wariness among investors over the metal’s longer-term outlook.

European shares tumbled more than 2 percent in early trade and the euro slid as Greeks woke up to shuttered banks and closed cash machines following the collapse of talks between Athens and its creditors.

Gold, which often benefits from uncertainty in the wider financial markets, initially rallied to a near one-week high at $1,186.91, but later gave up some of those gains.

Spot gold was up 0.1 percent at $1,175.86 an ounce at 1354 GMT, while U.S. gold futures for August delivery were up $2.20 an ounce at $1,175.40.

The wider environment remains relatively unfriendly for gold, with the United States still likely to raise interest rates at some point this year. That would increase the opportunity cost of holding non-yielding gold.

“Gold historically has always been the safe, tangible commodity which had appeal in times of turbulence, but recently, gold has increasingly trading off U.S. rate hike expectations, and how the dollar performs against the euro,” ING analyst Hamza Khan said.

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