Gold price nudges lower still, investors flocking to equities

Otmane El Rhazi from The Bullion Desk.

Gold edged lower on Tuesday morning, consolidating the previous session’s losses.

Spot gold was last at $1,183.00/1,183.80 per ounce, down $2.20 on Monday’s close – it fell more than one percent in the previous session on optimism that Greece is closing in on a deal with its creditors. Silver followed lower, slipping 13 cents to $15.99/16.04.

While yesterday’s meeting of eurozone finance ministers broke up without a deal being secured to free up the funds needed by Greece to avoid defaulting on its debts, there was talk that a breakthrough has been made. Investors then flocked to riskier assets, leaving gold in the doldrums.

“The toing and froing in the Greek debt crisis is keeping the precious metal markets on tenterhooks,” Commerzbank noted this morning.

European indices have risen further this morning – the Euro Stoxx is 0.85 percent higher, having closed up 4.1 percent on Monday, while the Cac 40 is up 0.84 percent and the Dax 1.02 percent.

If eurozone finance ministers approve a cash-for-reform package on Wednesday evening, EU leaders could sign it off at a meeting on Thursday, releasing billions of euros in loans for Greece and preventing a default – for now.

Although a deal is closer than at any time in the past five months, there are concerns that the latest set of proposals will not return the country, which still owes the ECB around 320 billion euros and owes billion to the ECB and the EU, to growth.

“It seems that barring some last-minute surprises, the Greek talks will likely result in an agreement that would kick the can down the road but which would avoid a default – a far more desirable outcome as far as the markets are concerned,” INTL FCStone’s Ed Meir said.

“As a result, we could see further selling pressure develop in gold over the short term. Moreover, with the removal of the ‘Greek irritant’ as a bullish issue, gold will likely revert to trading more on its own fundamentals, which at this stage, do not look that inspiring,” he added.

Still, the dollar is nearly one percent stronger this morning at 1.1243 against the euro despite positive manufacturing data out of the bloc.

The French flash manufacturing PMI at 50.5 and the German reading of 54.2 were both better than consensus. The EU flash services and manufacturing PMIs at 52.5 and 54.4 respectively also beat forecasts.

Overnight, China’s HSBC flash manufacturing PMI in June at 49.6 was better than the expected 49.4 but remains below the 50 level that separates expansion from contraction.

Later, US core durable goods orders, the HPI, the flash manufacturing PMI, new home sales and Richmond manufacturing data are all set for release.

The PGMs look slightly better – platinum is off six-year lows at $1,070/1,075 per ounce, up $16, while palladium at $700/705 was up $9.

(Editing by Mark Shaw)

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