Tentative Greece deal barely moves gold needle

Otmane El Rhazi from The Bullion Desk.

Gold in the US has made a muted response to news that eurozone leaders have reached a tentative agreement on a bailout for Greece.

Gold for August delivery on the Comex division of the New York Mercantile Exchange was last down $2.90 at $1,155.00 per ounce. Trade has ranged from $1,152.40 to $1,163.90.

After a marathon negotiating session, 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 the next three years.

The deal, unanimously backed by other eurozone leaders, requires an extensive overhaul of the country’s tax and pension regimes. It also requires that 50 billion euros in Greek assets be placed into an external fund for eventual privatisation.

This may be a hard sell to the Greek public, which voted against creditors’ austerity conditions in the July 5 referendum.

The euro spiked higher to 1.1196 against the dollar but failed to hold onto those gains – it was last at 1.1063, down 0.83 percent.

“It’s understandable for gold prices to come off following the removal of key eurozone risks, yet given the relative lack of significant safe-haven flows to begin with, the downside should be contained,” UBS analyst Edel Tully said.

Gold shorts might now be emboldened now that tail risks have been diminished; however, the propensity to add aggressively to positions here is likely to be constrained by the fact that gold short positioning is at all-time highs, Tully said.

“Ultimately, as the market digests the latest developments, we would expect the net impact on gold prices to be subdued overall, especially given current summer trading conditions,” she added.

In data, China’s trade surplus narrowed to $46.5 billion from $59.5 billion in May. Exports rose for the first time in four months, up 2.8 percent, while imports fell for the eighth consecutive month, down 6.1 percent. Unwrought copper imports fell 2.8 percent to 350,000 tonnes in June, the lowest in four months.

As for the other precious metals, Comex silver for September delivery was down 3.1 cents at $15.450 per ounce. Trade has ranged from $15.345 to $15.900.

Platinum futures for October delivery on the Nymex were up $1.00 at $1,033.30 per ounce while the most actively traded palladium contract at $660.30 was up $9.95.

 

(Additional reporting by Kathleen Retourne, editing by Mark Shaw)

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