Gold price edges up, equity markets tumble on Greek turmoil

Otmane El Rhazi from The Bullion Desk.

The gold price eked out a gain on Monday morning while world stock markets tumbled in the face of a potential Greek default.

Spot gold was last at $1,179.00/1,179.80 per ounce, up $4.40 on Friday’s close. Demand for safe havens is propping up the market after Greece pulled out of emergency meetings with creditors over the weekend and called for a referendum on Sunday to vote on the proposed bailout terms.

The country has shuttered its banks for at least a week and imposed capital controls after the European Central Bank froze emergency liquidity assistance to Greek banks at current levels.

Greece must make a 1.6-billion-euro payment to the IMF on Tuesday, the same day that its current bailout agreement is set to expire.

European and Asian stock markets plunged on the open as investors scrambled out of riskier assets. The Dax was last down 4.2 percent, the Euro Stoxx 4.32 percent and the Cac-40 4.13 percent. Asian markets were also hit hard – the Hang Seng was down 2.78 percent and the Nikkei 2.8 percent.

The euro is also down to its lowest since June 2 against the dollar at 1.0967, having hit a session low at 1.0967.

Despite the weaker euro, gold’s credentials as a source of safe-haven asset is propping up the metal. Many questions remain, ANZ said, particularly whether failure to pay the IMF mean an imminent exit from the euro.

“The only thing that we know for sure is that uncertainty is high, and in that environment, many markets will catch a safe-haven bid,” it said.

In other metals, silver was up seven cents at $15.83/15.88 per ounce, palladium was down $3 at $670/676 and platinum was $5 lower at $1,068/1,078.

Elsewhere, the People’s Bank of China cut the one-year lending rate by 25 basis points to 4.85 percent – its fourth cut since November – and lowered the amount of reserves certain banks are required to hold by 50 basis points. It also cut the one-year deposit rate rate by 25 basis points to 2.0 percent.

In today’s data, Spanish CPI came in better than expected at 0.1 percent, with German preliminary CPI and US pending home sales to come.

 

(Editing by Mark Shaw)

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