Gold steady, Greek debt talks and FOMC statement in focus

Otmane El Rhazi from The Bullion Desk.

Gold was steady in the Asian trading hours with the market’s focus on Greek debt talks and the next Federal Reserve statement.

The spot gold price was last at $1,186.5/1,187.0 per ounce, up $1 on the previous close. Trade has ranged from $1,183.9 to $1,185.5 so far.

The yellow metal is continuing to find support from Greek debt developments. European Central Bank president Mario Draghi said on Monday that Europe needed a strong and comprehensive agreement very soon and that the ball lay squarely in the camp of the Greek government to take the necessary steps.

Over the weekend, a deal was not struck as talks between Greece and its creditors broke up after less than an hour. This once again raised concerns of Athens being unable to repay 1.6 billion euros owed to the International Monetary Fund by the end of this month. A default could see Greece exit the eurozone.

The forthcoming eurogroup meeting on June 18 is now being proposed as the next opportunity for negotiations.

“The yellow metal may be subject to risk on/off plays should anything concrete come out of the ongoing debt negotiations, however the price action will most likely be USD driven as a function of EUR/USD volatility,” MKS said.

The dollar was last at around 1.1274 against the euro.

The market is also looking ahead to Wednesday’s Federal Open Market Committee June policy statement. The US central bank is not expected to raise interest rates at this meeting but it could lay the foundation for action later this year.

“A hawkish FOMC statement and/or projection would be interpreted as negative for the bullion market, while a dovish statement and/or projection would be viewed as positive for gold,” James Steel, HSBC analyst, said.

In data from the US overnight, industrial production for May fell 0.2 percent, missing a forecast 0.4-percent increase. Capacity utilisation for the same month was as anticipated at 78.3 percent. June’s Empire State manufacturing index was -2.0 – it had been seen at 5.8 – but the NAHB housing index for June was better than expected at 59.

Data releases tonight include German CPI and ZEW Surveys, while out of the US housing starts and building permits are due.

In other precious metals, silver was little changed at $16.04/16.09. Platinum at $1,088/1,093 was up $2 – in the previous session the metal hit a fresh six-year low at $1,077. Palladium was unchanged at $733/738.

On the Shanghai Futures Exchange (SHFE) gold for December delivery was unchanged – it recently traded at 240 yuan per gram.

 

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