July 01, 2015
Gold Struggles on Firm Dollar, Lack of Haven Bids from Greek Crisis
(Reuters) - Gold struggled close to its lowest in nearly four weeks on Wednesday, as the dollar stood tall after Greece missed a loan payment to the International Monetary Fund.
The Greek debt crisis has failed to spark robust safe-haven bids, with bullion investors still worried over an expected U.S. rate hike later this year after more strong economic data.
Spot gold edged up 0.1 percent to $1,173.75 an ounce by 0333 GMT, but largely held on to the 0.7 percent fall from Tuesday. It fell to $1,166.35 in the previous session, the lowest since June 5.
Greece made last-minute overtures to its international creditors for financial aid on Tuesday, but it was not enough to save the country from becoming the first developed economy to default on a loan with the IMF.
With its missed payment to the IMF, Greece is on a path out of the euro with unforeseeable consequences for both the EU's grand currency project and the global economy.
"We are seeing some beginning-of-the-month buying for gold which is pushing up prices slightly today," said a precious metals trader in Hong Kong.
"But the Greek situation itself has been disheartening for gold. People don't seem to be worried about the contagion effect and that is clear in the gold price," he said.
Bullion typically sees safe-haven bids during times of financial and economic uncertainties. But gold's underperformance points to much broader weakness as investors gear up for rising U.S. rates this year.
There is still scope for the crisis to drive more risk-averse money into gold, if it worsens to the point where Greece leaves the euro zone, or if there is contagion into other economies in the bloc, such as Italy, Portugal or Spain.
With the euro on the defensive on Wednesday, the dollar index edged higher for a second straight session.
The Federal Reserve is on track to raise interest rates this year, with September still "in play," a top Federal Reserve official said on Tuesday, despite growing market volatility and anxiety in the wake of Greece's debt default.
St. Louis Fed President James Bullard shrugged off the impact of Greece's economic problems and said the Fed will remain data dependent on its view about when to raise rates.
Data on Tuesday showed U.S. consumer confidence increased solidly in June, supporting expectations the Fed was on track to hike rates this year.
Higher rates would dent demand for non-interest-paying gold.