24 June 2015
Gold Drops to 1-Week Low as Stocks Rally, Dollar Firms
(Reuters) - Gold slid to a one-week low on Wednesday, down for a fourth consecutive session, as the dollar strengthened and global stock markets continued to rally on expectations of a Greek debt deal.
Asia shares rallied for a sixth straight session as investors chose to be optimistic that Greece would reach a deal with its creditors, while the dollar held broad gains as the prospect of U.S. rate rises came back on the radar.
"Investors reacted to enhanced hopes of a Greek debt deal by liquidating or shorting gold," HSBC analyst James Steel said in a research note.
"Gold has absorbed a lot of "bad" news recently and we wonder just how much lower the market is likely to go. Physical EM (demand in emerging markets) still appears sluggish, notably but not exclusively in India, an important gold-consuming country. This opens the way for lower prices but we think declines may be modest."
Spot gold fell 0.1 percent to $1,176.7 an ounce by 0212 GMT, after losing 0.6 percent on Tuesday. It hit a session low of 1,175.45, weakest since June 17.
The precious metal, often seen as an alternative investment during times of financial and economic uncertainties, has come under pressure after Greece's leftwing government expressed confidence that parliament would approve a debt deal with lenders.
Gold is vulnerable to pressure from other factors such as the prospect of the first U.S. interest rate rise from the Federal Reserve in nearly a decade. That would boost the opportunity cost of holding non-yielding bullion.
Fed Governor Jerome Powell on Tuesday said he was prepared to raise interest rates twice this year, once in September and once in December, as long as the economy performs as expected.
Later in the day, the Atlanta Fed's GDPNow forecast model showed the U.S. economy is on track to grow 2 percent in the second quarter.
Strength in the dollar, which is benefiting from upbeat U.S. data, further dragged on gold, which is priced in the greenback and tends to gain when the currency is weak.
Physical demand in top consuming region Asia has been sluggish as monsoon concerns weighed on demand in India and a better-yielding stock market kept buyers away in China.