Gold futures have been unable garner much safe-haven demand on Wednesday while the platinum group metals remain in a broad-based commodities sell-off.
Gold for August delivery on the Comex division of the New York Mercantile Exchange was last up 90 cents at $1,153.50 per ounce, which is about a four-month low. Trade has ranged from $1,145.90 to $1,155.60.
Gold typically benefits from equity market turmoil and made strong gains when the eurozone crisis flared up in 2011. But this time, a falling Chinese stock market and the Greek debt drama have left gold investors unmoved and the gold price down, Macquarie noted.
“We offer three reasons as to why this might be – the events have not been negative enough, they have been the wrong kind of negative to make gold the answer, particularly given a dwindling investor base, or that gold has been overwhelmed by other negative factors behind a generalised commodity sell-off,” Macquarie said.
“Gold can still act as a safe-haven, though the conditions in which it is likely to do so are narrower than many had thought. Let’s hope we don’t find out what those conditions are the hard way,” the bank analysts added.
In Asian equity markets today, the Nikkei, Shanghi Composite and Hang Seng closed down 3.14 percent, 5.92 percent and 5.51 percent respectively. The Shanghai Composite has crumbled more than 30 percent from its mid-June peak amid extreme volatility.
The China Securities Finance Corp announced this morning that it will provide more financing for purchases of shares in small and medium-size companies but to this point the extensive government intervention have not slowed the rout.
Elsewhere, European leaders have set a Sunday deadline for Greece to reach an agreement after an emergency summit meeting on Tuesday ended without a resolution. Greece is scheduled to make a payment of 3.5 billion euros on July 20 to the European Central Bank.
“We suspect that by the end of this week or next, an interim compromise will be reached in order to keep the country limping along. In fact, there is talk of some kind of bridge financing that could be put in place while a new bailout program is negotiated. But the clock is ticking,” INTL FCStone’s Edward Meir said.
As for the other precious metals, Comex silver for September delivery was down 4.9 cents at $14.920 per ounce. Trade has ranged from $14.705 to $15.100.
Platinum futures for October delivery on the Nymex were down $21.70 at $1,019.80 per ounce, which is the lowest level since March 2009, while the most actively traded palladium contract was at $636.00, a drop of $16.40 or about 2.4 percent.
“The protracted bear market has been heavily influenced by supply and demand. South Africa’s miners have continued to increase production in a market that has already been oversupplied,” Bank of America/Merrill Lynch noted.
“At the same time, demand from Europe’s auto producers was muted and Chinese jewellers have also reduced their metal purchases on a confluence of factors,” the bank added.
In wider markets, the euro was near unchanged at 1.1014 against the euro, while light sweet crude (WTI) oil futures at $52.64 per barrel were up 31 cents.
(Editing by Mark Shaw)
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