Gold dropped below the key psychological $1,200 mark on Monday morning primarily thanks to resurging dollar on renewed concerns over Greece’s position in the eurozone.
The spot gold price was last $9 lower at $1,196.80/1,197.60 per ounce – its lowest in two weeks and down significantly from last week’s heights of $1,230.
“Evidently some investors are taking profits, thereby playing their part in the gold price slide,” Commerzbank noted, though the bank attributed the losses primarily to the dollar surging to 1.0890 against the euro, its strongest since April 28.
Silver also succumbed to dollar strength – it was last down 27 cents at $16.78/16.83 per ounce, also its lowest since May 13 – while platinum slipped $6 to $1,134/1,139 but palladium rose $4 to $782/787.
The single currency has come under pressure from fears that Greece may default on its debts and begin the problematic process of an exit from the bloc economy.
Greece must repay four loans to the International Monetary Fund in June totalling 1.6 billion euros. But Greek interior minister Nikos Voustis spooked markets when he said over the weekend that Athens would not be able to make the payments without a bailout deal with its creditors in place.
Although the country must implement a set of new economic austerity measures to secure the funds it needs, Prime Minister Alexis Tsipras is reluctant to renege on promises made during the election campaign.
“Something will likely have to give over the course of the next few weeks and we suspect that in spite of all the tough talk, the Greeks will have to play ball or slip towards a technical default very much styled on the Cypriot model,” INTL FCStone’s Ed Meir said.
The dollar has also taken support from April inflation report on Friday – core CPI rose 0.3 percent, above market expectations of 0.2 percent and the largest increase since 2013 – and a speech from Fed chair Janet Yellen in which she reiterated her view that the US economy should continue to improve, thereby warranting an initial rise in the federal funds rate at “some point this year”.
In other market news, Market speculation that China will introduce further monetary easing measures is generally lifting sentiment in the complex after China’s top banking regulator on Monday warned of rising credit risk from real estate, local government debt, and shadow banking.
Bad loans in the first quarter of 982.5 billion yuan were up 139.9 billion yuan on the same period of last year, bringing the overall bad loan ratio to 1.39 percent, he said.
The data agenda will be US-focused today, with core durable goods, durable goods orders, HPI, flash service PMI, CB consumer confidence, new home sales and Richmond manufacturing data all set for release.
(Additional reporting by Kathleen Retourne, editing by Mark Shaw)
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