Gold limped sideways in early morning trading on Monday, holding firm in the face of crosswinds from the latest developments in the Greek bailout saga.
Spot gold was last up $2.80 on Friday’s close at $1,183.20/1,184.00 per ounce, having traded in an intraday range of $6 so far. Silver was last at $15.88/15.93, down three cents, platinum was $4 lower at $1,186/1,191 per ounce and palladium slipped $2 to $731/737.
“The overall weakness seems to be on risk reduction across markets, which we put down to Greece. But maybe Greece is providing some support to gold, which could increase if investors start to feel the need for a safe haven,” FastMarkets analyst William Adams said.
Talks between Greece and its creditors broke down again over the weekend, with a last-ditch attempt halted after less than an hour of negotiations. Prime Minister Alexis Tsipras reportedly brought nothing new to the table and continues to avoid implementing the crucial reforms Athens needs to avoid a default.
Greece must repay 1.6 billion euros to the International Monetary Fund (IMF) by the end of this month; this latest setback puts the country one step closer to a default that may seal an exit from the bloc.
“After another week with no clear breakthrough in Greek negotiations, this week’s Eurogroup meeting [on Thursday] looks like a crucial focal point for markets,” Barclays Capital said.
Still, physical gold buying has yet to respond to the crisis – the broker believes it should be prompting some safe-haven buying.
“Amid a seasonally slow period for demand, investor interest appears to be waning in gold, despite the uncertainty surrounding Greece,” BarCap said.
The dollar opened higher against the euro this morning, touching session highs of 1.1186, before settling at 1.1233.
Market participants will also look to this week’s Fed meeting for direction, scrutinising the wording of its statement for clues as to when the normalisation of monetary policy will begin.
The members of the Fed’s policy board are locked in a debate on when will be the right time to raise rates, which have been near zero since December 2008.
At its last meeting, the Fed removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely data dependent and a rate increase could happen at any future meeting.
The current consensus is that the first increase will take place in September but data so far for the second quarter suggests a rebound that may sway the Fed into altering the language.
In data today, the eurozone trade balance and US capacity utilisation, industrial production, the NAHB housing index and the Empire State manufacturing index are all due.
(Editing by Mark Shaw)
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