Gold prices rose Monday as investors flocked to the precious metal to protect their wealth against the risks of a potential default in Greece.
The most actively traded contract, for August delivery, was recently up $2.20, or 0.2%, at $1,175.40 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices have been trading around $1,200 an ounce since March as support from debt problems in Greece was offset by investors’ expectations of higher interest rates in the U.S. The precious metal is widely considered a haven from political and economic uncertainty because it keeps its value better than paper assets during periods of turmoil. However, gold doesn’t earn interest or pay dividends and would struggle to compete with bonds and stocks that do when interest rates climb.
On Monday, gold prices surged to $1,187.60 an ounce, a four-session high, as investors rushed to buy on fears that Greek debt problems would spread to other European credit markets and cause problems with the euro. Bailout negotiations between Greece and its international creditors broke down on Friday, and Greece subsequently imposed controls to stop money from exiting the country and ordered its banks to remain shut for six days.
Greece’s current bailout program expires Tuesday, the same day that Athens is due to repay €1.55 billion to the International Monetary Fund. Investors worry that without international rescue loans, Greece would default on the payment and embark on an exit of the currency union.
Gold prices rallied alongside other haven assets like U.S. Treasury bonds and the U.S. dollar during Asian and European trading hours, but all three pulled back amid hopes that an 11th-hour deal will be reached, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
