Gold price drops after Greece agrees third bailout deal

Otmane El Rhazi from The Bullion Desk.

The gold price dropped on Monday after Greece agreed a deal with eurozone leaders on a third bailout package.

Spot gold was last at session lows of $1,154.00/1,154.80 per ounce, down $8.20 on the pre-weekend close, although largely precious metals are holding up reasonably well.

Silver followed gold lower- the metal was last down 12 cents at $15.41/15.46 per ounce. Platinum was $2 softer at $1,022/1,027 while palladium was up $4 at $650/655.

German Chancellor Angela Merkel, French President François Hollande and Greek Prime minister Alexis Tsipras agreed a cash-for reforms deal worth up to 87 billion euros over three year years.

The deal, unanimously backed by other eurozone leaders, requires an extensive overhaul of the country’s tax and pension regimes. This may be a hard sell to the Greek public, which voted against creditors’ austerity conditions in the July 5 referendum.

European Commission President Jean-Claude Juncker said publically that there will be no ‘Grexit’ following while head of Eurogroup head Jeroen Dijsselbloem said talks will continue throughout the week on the finer details.

The euro is weaker this morning, slipping around half a cent to 1.1110 against the dollar while European equity markets are stronger – the FTSE 100 was last up 0.7 percent and the Dax almost 1.5 percent.

The latest CFTC data showed that speculators continue to exit the gold market, which is also weighing on the price. Net longs were cut by almost to 7,574 contracts, the smallest net long position since at least 2006. A similar story is also being played out in silver, where speculators increased their net short position by 1,190 contracts to 10,329 contracts.

“As we have previously noted, the fact that gold has not reacted positively to either the Greek scenario or the sharp selloff in Chinese equities does not bode well for it going forward and suggests that the precious metal will likely move lower in the weeks ahead,” INTL FCStone’s Edward Meir said .

“Indeed, we did approach key support at $1,141.60 last week and we suspect it is a matter of time before this level is taken out,” he added.

In data, China’s trade surplus narrowed to $46.5 billion from $59.5 billion in May. Exports from the world’s second largest economy rose for the first time in four months, up 2.8 percent against expectations of around one percent, while imports fell for the eighth consecutive month, down 6.1 percent.

“This is a reflection of weak domestic demand, namely soft industrial production,” MKS said. “Overall, the trade numbers point to stabilisation at best for exports but a continued weak domestic demand picture.”

There is no other major data for release today.

(Editing by Mark Shaw)

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