Gold hits 3-week low ahead of Greek debt deal

LONDON, June 26 (Reuters) – Gold slid to three-week lows on Friday as the euro slipped against the dollar on caution ahead of crunch talks on Greece this weekend, with concerns over the longer-term outlook for the metal also weighing on prices.

Greece failed again to clinch a deal with its international creditors on Thursday, setting up a last-ditch effort on Saturday either to avert a default next week or start preparing to protect the euro zone from financial market turmoil.

Spot gold was down 0.1 percent at $1,171.55 an ounce at 1407 GMT, while U.S. gold futures for August delivery were down 60 cents an ounce at $1,171.20. Spot gold earlier fell to $1,168.25, its lowest since June 5.

“I am a bit surprised that gold is trading (with) a weak tone. Pressure comes mainly from the re-strengthening dollar,” Heraeus trader Alexander Zumpfe said, noting that demand for physical metal had improved.

“I wouldn’t rule out testing the mid-$1,160s. However, I don’t expect a deeper correction before the weekend, with another final Greek decision in front of us.”

Global stocks fell on Friday as equity investors sought to cut exposure to risk after Greece and its creditors again failed to resolve their differences. The euro slipped 0.1 percent against the dollar.

Expectations that U.S. interest rates will rise for the first time in nearly a decade this year, lifting the U.S. currency and boosting the opportunity cost of holding non-yielding bullion, have pressured gold, keeping it in a range.

Gold has held largely between $1,160 and $1,230 since mid-March, struggling to break higher despite an ostensibly bullish rise in tensions over Greece.

It has drawn some support from a rise in holdings of gold-backed exchange-traded funds, which issue securities backed by physical metal, this week after outflows earlier this year.

Holdings of the biggest gold ETF, SPDR Gold Shares, rose 6.9 tonnes on Thursday, their biggest one-day increase since Feb. 2.

Silver was down 0.7 percent at $15.73 an ounce, having briefly touched a three-month low of $15.50. Platinum was down 1 percent at $1,070.24 an ounce, while palladium was down 1.2 percent at $669.50 an ounce.

Palladium fell to a near two-year low at $666.82 in earlier trade after posting its biggest one-day drop since September.

“While short-term moves are driven by many factors and the metal faces a number of challenges, we think the underlying weakness is due to a sharp slowdown in global auto sales growth,” Macquarie said in a note.

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