BDl: Gold climbs, euro slips as possible Greek exit nears
Jun 29, 2015 - 2:27 PM GMT
by Dalton Barker
Gold prices rose in early-morning US trading period after talks between Greece and its creditors dissolved over the weekend, nudging the country closer to the eurozone exit door.
Gold for August delivery on the Comex division of the New York Mercantile Exchange was last up $9.20 or 0.8 percent at $1,182.40 per ounce. Trade has ranged from $1,175.40 to $1,187.60.
On Sunday, the Greek government introduced capital controls after the European Central Bank (ECB) refused to increase emergency loans, deciding instead to maintain them at the current level. Greek Prime Minister Alexis Tsipras responded by pulling out of talks and forcing a closure of banks this week.
Now the Greek people will decide their future in the bloc in a referendum. A rejection of further pension cuts could set the stage for a Greek exit from the bloc – the so-called Grexit. An unprecedented – for an advanced economy – technical default could have far-reaching consequences for national economies.
The country must make a repayment of 1.5 billion euros to the International Monetary Fund by tomorrow, with IMF managing director Christine Lagarde stating that no extensions will be provided. The country owes 9.7 billion euros to the IMF this year and 6.6 billion euros to the ECB in July and August alone.
“The debt crisis in Greece, which escalated dramatically over the weekend, is driving up gold prices as the new week gets underway.” Commerzbank said. “The uncertainty about what will happen next in and to Greece should contribute to solid demand for gold and lend support to its price.”
Gold is typically seen as a safe haven by investors but its price has not changed much, giving pause to some market observers.
“Investors are simply not that interested in gold at present and physical demand is weak.” FastMarkets head of research William Adams said. “We are surprised how weak the performance of gold has been today, given the escalation of the Greece issue.”
Elsewhere, the People’s Bank of China cut the one-year lending rate by 25 basis points to 4.85 percent – its fourth cut since November – and lowered the amount of reserves certain banks are required to hold by 50 basis points. It also cut the one-year deposit rate rate by 25 basis points to 2.0 percent.
In wider markets, Germany’s DAX and France’s CAC-40 were down 2.7 percent and 3.1 percent respectively, while the euro was 0.3 percent weaker at 1.1134 against the dollar.
In today’s data, Spanish CPI came in better than expected at 0.1 percent, with German preliminary CPI and US pending home sales to come.
As for the other precious metals, Comex silver for July delivery was up 1.05 cents at $15.840 per ounce. Trade has ranged from $15.750 to $15.995.
Platinum futures for July delivery on the Nymex rose $2.80 at $1,083.50 per ounce, while the most actively traded palladium contract was at $673.90, down $4.70.
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