SINGAPORE — Gold gave up early gains on Monday as a robust dollar outweighed safe-haven demand after Greeks rejected terms of a bail-out package in a referendum.
The failure to sustain the rally shows gold’s struggle amid prospects of higher US interest rates despite the uncertainty over Athens’s financial situation and its future in the eurozone, a situation that would typically garner safety bids for bullion.
Spot gold was flat at $1,167.57/oz by 4.01am GMT, after earlier jumping by as much as 0.6%. US gold climbed nearly 1% in its biggest daily gain in about two weeks to $1,174.40 before paring some gains to trade up 0.3%. Silver, platinum and palladium all declined.
"With Greece voting against austerity, the expectation is for gold prices to climb but ... momentum (is) fizzling out," Phillip Futures analyst Howie Lee said.
"Its safe-haven property does not appear to be carrying much weight," Mr Lee said.
In a referendum on Sunday, Greeks overwhelmingly rejected conditions of a rescue package from creditors. Official figures showed 61% of Greeks had rejected a deal that would have imposed more austerity measures on an already ravaged economy.
The vote leaves Greece in uncharted waters: risking a banking collapse that could force it out of the euro. Without more emergency funding from the European Central Bank (ECB), Greece’s banks could run out of cash within days. Gold, typically seen as an alternative investment during times of financial and economic uncertainty, rallied early in Asian hours as the euro slumped and US equity futures fell on risk-averse sentiment in the market. But the precious metal failed to hold the gains, even as other safe-havens such as the yen rallied and the dollar climbed to its highest in a month. A higher dollar makes gold more expensive for holders of other currencies, while also lowering its appeal as a hedge.
The greenback has also been supported recently by the expectation the Federal Reserve will raise interest rates from record lows this year. That has weighed on gold, a noninterest-paying asset.
Gold could get a boost if the Fed decided to postpone a rate hike or if there was a contagion risk in Europe because of the Greek crisis, a trader said.
Silver was down 8c or 0.51% at $15.59, platinum lost $10.10 or 0.94% to $1,069.75 and palladium fell $4.15 or 0.61% to $675.50.
