Gold recoups losses as Greek exit becomes more likely

Otmane El Rhazi from The Bullion Desk.

Gold rose in the US on Tuesday while the eurozone prepares for a potential Greek exit, while a sinking dollar is providing support.

Gold for June delivery on the Comex division of the New York Mercantile Exchange rose $11.70 to $1,194.70 per ounce. Trade has ranged from $1,179.70 to $1,196.30.

Greece defaulting on its obligations is becoming increasingly likely as the country continues to negotiate with its creditors, with no imminent resolution on particular issues such as state pensions and collective bargaining rights.

And although Athens has started to repay 750 million euros to the International Monetary Fund ahead of today’s deadline, easing fears of a default this month, Greek finance minister Yanis Varoufakis has warned that his country faces insolvency within weeks and Alexis Tsipras’ government said this morning that it has just over 600 million euros in cash reserves.

“Reports have even surfaced that German Chancellor Angela Merkel is being told by people close to her to start planning on a Greek exit,” Edward Meir, an analyst at INTL FCStone, said.

The euro was 0.7 percent stronger at 1.1231 against the dollar, lending support to the yellow metal after the greenback made considerable gains yesterday.

“The greenback has been weaker on account of yet more turbulence in the European bond markets, with ten-year German Bond yields up by 10 basis points today and hitting 0.70 percent,” Meir added.

Meanwhile in the eurozone, Germany’s DAX and France’s CAC-40 were both down 1.1 percent and 1.6 percent respectively.

In data today, the US labor market conditions index month-over-month in April was down 1.9, finishing lower for the second straight month. In Japan, leading indicators in March came in at the forecast of 105.5 percent.

In other precious metals, Comex silver for July delivery was up two cents at $16.335 per ounce. Trade has ranged from $16.120 to $16.495.

Platinum for July delivery on the Nymex rose $5.30 to $1,132.60 per ounce while the most actively traded palladium contract was at $782.20, up $1.75.

Light sweet crude (WTI) futures increased 49 cents to $59.74 per barrel in the most active contract.

 

(Editing by Tom Jennemann)

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