BB: Gold Stymied as Greek Crisis Strengthens Dollar; Palladium Drops
Spot gold fell as Greek voters’ rejection of austerity strengthened the dollar, diminishing the appeal of the metal as an alternative. Silver, platinum and palladium declined.
Greeks voted in a weekend referendum to reject further measures required to win another bailout, spurring speculation the country will be forced to quit the euro zone. Bullion failed to hold onto earlier gains as the Bloomberg Dollar Spot Index reached the highest in almost a month.
Gold traders will look past Greece and focus on the dollar and the outlook for rising U.S. interest rates, according to Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam. Higher borrowing costs curb the metal’s allure because it doesn’t pay interest or give returns like other assets such as bonds and equities.
“The strength of the dollar as a haven continues, and investors may look beyond Greece to Fed rate action,” said George Gero, vice president of global futures at RBC Capital Markets in New York. “This may be a headwind for gold.”
Gold for immediate delivery lost 0.3 percent to $1,164.82 an ounce at 7:52 a.m. in New York, according to Bloomberg generic pricing. Futures for delivery in August were little changed at $1,163.90 on the Comex.
ETP Holdings
The standoff in Greece hasn’t sparked much demand for gold, which is traditionally seen as a store of value amid crises. The metal fell in the past four quarters in the longest slump since 1997. Holdings in exchange-traded products backed by bullion fell 5.4 percent since this year’s peak in late-February and are near the lowest in six years, data compiled by Bloomberg show.
“The lack of influence that the euro crisis is having on gold is particularly noteworthy,” Barclays Plc said in a report on Monday. The metal’s main role at present is as a proxy for the timing and likelihood of U.S. monetary tightening, the bank said.
The Bloomberg Dollar Spot Index reached the highest since June 8. It rose 18 percent in the past year on prospects for the first U.S. rate increase since 2006. Gold fell 12 percent in that time, while bullion priced in euros climbed 8.9 percent.
Silver for immediate delivery lost 0.7 percent to $15.582 an ounce in London. Platinum slipped 1.8 percent to $1,064.07 an ounce, after dropping to a two-week low of $1,061.57. Palladium retreated 1 percent to $678.95 an ounce.
