Gold price near one-week lows, market awaits next Greece move

Otmane El Rhazi from The Bullion Desk.

The gold price remained mired in negative territory on Wednesday morning ahead of a crucial phase in the Greek debt saga.

Spot gold was last at $1,176.40/1,177.20 per ounce, down $1 and having touched its lowest in more than a week earlier at $1,173.60.

The dollar is the main driver of the lower prices, analysts noted – the greenback hit its best in more than two weeks on Tuesday at 1.1135 against the euro but has since settled at 1.1217.

This follows comments from Federal Reserve governor Jerome Powell – he said the odds of the US central bank raising interest rates at its September meeting are better than evens in light of stronger-than expected retails sales and wage growth data.

As well, the market is watching the Greek debt saga, particularly following the positive tone that emerged earlier in the week that triggered huge inflows into the equity markets, leaving gold in the doldrums.

But yesterday’s hopes that Greece can secure a bailout deal this week appeared to have already soured – while some of the country’s creditors do not feel the proposal goes far enough, prime minister Alexis Tsipras faces a tough sell of fresh austerity measures to his own party, his coalition partners in government and the Greek public.

Greek equities have fallen heavily this morning while major European bourses are little changed while awaiting fresh developments from this evening’s third eurogroup meeting this week, a summit of European leaders on Thursday and, if a deal is reached, possibly a three-day debate in the Greek parliament where it must be approved before Greece receives any aid.

“Although this appears possible in light of the latest proposals made by the Greek government, it is questionable whether a long-term solution can be found. The uncertainty is likely to continue,” Commerzbank said in a note.

In data, the German IFO business climate at 107.4 came in short of forecasts of 108.2, reflecting the first decline in the number following three consecutive months of growth. The report suggests that the outlook for Europe’s biggest economy is “overcast”.

In an otherwise quiet day for data, this afternoon sees the release of final GDP for the first quarter from the US, which is widely expected to come in at -0.2 percent.

Other metals were mixed – silver was last up three cents at $15.83/15.88 per ounce, platinum rose $4.50 to $1,068/1,073 and palladium was $9 higher at $700/706.

(Editing by Mark Shaw)

 

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