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Gold extends drop as Greek deal shifts focus to Fed's timing
[SINGAPORE] Gold fell for a second day after Greece reached a deal that could pave the way for a new bailout, damping demand for the metal as a haven asset and shifting investors' focus to the probable timing of a US rate increase.
Bullion for immediate delivery lost 0.2 per cent to US$1,156.25 an ounce at 10.44 am in Singapore, according to Bloomberg generic pricing. The metal declined as much as 1.1 per cent on Monday to US$1,151.27, the lowest price since July 8, and ended 0.5 per cent lower to snap three days of gains.
Gold dropped 2.4 per cent this year as the Federal Reserve signaled it planned to boost rates. Fed chair Janet Yellen maintained her call on Friday for an increase this year, and the rate-setting Federal Open Market Committee will gather at the end of this month to assess the economic recovery. While equities rallied on Monday as the Greek deal was announced, the plan may yet come unstuck as the terms require approval from Greece's parliament this week.
"A resolution to the Greek crisis will allow the FOMC to place greater emphasis on the solid momentum in the US economy," Australia & New Zealand Banking Group Ltd said in a note. A liftoff later this year is still on track, it said.
Higher rates curb the appeal of bullion, which doesn't pay interest or give returns like assets such as bonds. The Bloomberg Dollar Spot Index was little changed on Tuesday after rising 0.6 per cent on Monday. An appreciating dollar tends to restrict gold's gains.
Futures for delivery in August were little changed at US$1,154.90 an ounce from US$1,155.40 on the Comex in New York on Monday. Silver for immediate delivery was 0.4 per cent lower at US$15.4487 an ounce.
Platinum was little changed at US$1,034.95 an ounce after two days of gains as prices rebounded from a six-year low of US$1,010.26 on July 8. Palladium was at US$660 an ounce from US$660.75 on Monday after dropping to a two-year low of US$630.35 last week.