Gold struggles as EU prepares to kick Greek can down the road

Otmane El Rhazi from The Bullion Desk.

Gold futures slipped modestly in the US on Tuesday morning when tentative optimism over Greece and a stronger dollar further dampened already-soggy sentiment.

Gold for August delivery on the Comex division of the New York Mercantile Exchange was last down $3.70 at $1,180.40 per ounce. Trade has ranged from $1,180.20 to $1,187.70.

“Last week’s short-covering rally petered out and we moved back to the middle of the new range of $1,160-$1,200,” Marex Spectron noted. “Much was made of the price rise last week, with various commentators attempting to link it to Greek problems, but it was all down to a market that was once again overly short near the lows, realising that rate rises were not yet on the cards.”

“The doldrums that the precious metals complex have found themselves in recently look set to continue for a while yet,” the broker added.

For Greece, 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 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 with the gold bulls being an exception,” INTL FCStone’s Edward 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.

In wider markets this morning, the euro was 1.2 percent weaker at 1.1205 against the dollar, while Germany’s DAX and France’s CAC-40 were each up 1.35 percent.

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

“So there will be few numbers to move the dollar around and in turn, move gold,” Marex Spectron said. “In the meantime, the current market conditions will continue, with thin, disinterested markets not creating any reason for real players to get involved.”

As for the other precious metals, Comex silver for July delivery was down 21.2 cents at $15.930 per ounce. Trade has ranged from $15.885 to $16.175.

Platinum futures for July delivery on the Nymex were up $9.80 at $1,070.40 per ounce, while the most-actively traded palladium contract was at $699.30, up $3.85.

 

(Editing by Mark Shaw)

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