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Gold slips despite Greek crisis on weak safe-haven bids, robust dollar
[SINGAPORE] Gold dipped on Tuesday as it failed to garner strong safe-haven bids even with Greece heading for a debt default later in the session, while a robust dollar and a recovery in stock markets also weighed.
Spot gold fell 0.2 to US$1,177.60 an ounce by 0344 GMT, after gaining 0.6 per cent in the last two sessions. For the month, the metal is down 1 per cent.
The dollar gained 0.4 per cent against a basket of major currencies. Asian shares and US stock futures also rose on Tuesday after overnight losses, though concerns over Greece remained.
"Surprisingly, the safe-haven bids haven't materialised," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "Maybe they will once we see the impact of a Greek default spreading to other countries in Europe and elsewhere." "Gold price could possibly move sharply after the Sunday referendum," he said.
Greece is just hours away from defaulting on a 1.6 billion euro loan from the International Monetary Fund. Talks with creditors broke down over the weekend, with Prime Minister Alexis Tsipras calling for a bailout referendum on July 5.
Tens of thousands of Greeks rallied on Monday to back their leftwing government's rejection of a tough international bailout.
The breakdown of talks has pushed the European Union and euro zone into uncharted terrain. The Athens stock exchange was closed like the banks, but other financial markets fell on fears that Greece could be heading out of the euro. In overnight trading on Wall Street, all three major stock indices tumbled.
Despite the risk-averse sentiment in the markets, bullion pared some of its gains on Monday, in what MKS Group traders said was a "relatively disappointing day for the precious complex considering the turmoil and uncertainty surrounding the Greek situation." Though gold is usually seen as an alternative investment during times of financial and economic uncertainties, the safe-haven gains tend to be short lived.
Gold has been weighed down this year on expectations the Federal Reserve will hike US interest rates later this year. Higher rates could dent demand for non-interest-paying bullion.
The fallout from Greece in the United States is expected to be modest and not enough to throw the Fed's likely September rate hike off course, said former Fed officials and analysts.
Technically, gold still remains weak, and could likely test US$1,163, analysts at ScotiaMocatta said.