Gold dips after failure to strike Greece debt deal
Gold eased on Wednesday as the dollar firmed after Greece’s lenders failed to strike a debt deal for the country, although bullion found underlying support from continued talks aimed at averting a U.S. fiscal crisis.
Spot gold slipped 0.1 percent to $1,725.78 an ounce by 1217 GMT, hurt by a drop in the euro. U.S. gold was up 0.15 percent at $1,726.10.
European shares and the euro fell after Greece’s international lenders failed to reach an agreement needed to provide it with emergency aid, though some of the losses were recouped on talk that a deal was close.
“The Greece developments are not very euro supportive, and this is weighing on gold,» said Bayram Dincer, analyst with LGT Capital Management.
A strong dollar normally weighs on commodities priced in the greenback, including gold, as it makes them more expensive for buyers holding other currencies.
International lenders failed for the second week to reach a deal to release emergency aid for Greece and will try again next Monday, but Germany signalled that major divisions remain.
Losses in bullion were checked however by expectations that U.S. lawmakers would reach a deal to avert automatic tax hikes and spending cuts in early 2013, which could otherwise trigger another recession.
Federal Reserve Chairman Ben Bernanke said on Tuesday that 2013 could be a «very good year» for the U.S. economy if politicians can strike a quick deal to avoid the so-called fiscal cliff.
The conflict in the Middle East helped to support the gold price. A failure to reach a cease-fire would further support gold’s safe-haven appeal, analysts said.
Gold can sometimes be viewed as a safe haven investment, especially in times of great uncertainty.
U.S. Secretary of State Hillary Clinton on Wednesday pursued a Gaza truce, with Israel and Hamas still at odds over key terms, as Israeli air strikes shook the enclave and Palestinian rockets hit across the border.
News that Brazil, Kazakhstan and Turkey had raised their gold holdings also supported gold prices.
Brazil raised its gold holdings by 17.170 tonnes in October, data from the International Monetary Fund showed on Wednesday, bringing its bullion reserves to 52.518 tonnes.
“This is a chunky purchase by a central bank, and the gold market will likely sit up and pay attention to today’s news, not just because of its size but because this is a central bank that has not been active in the market for some time,» UBS said in a note to clients.
Traders and analysts expect gold to remain rangebound as some traders unwind long positions before Thanksgiving, but say the longer-term outlook for gold remains positive due to expectations of a continuing ultra-loose monetary environment in the United States.
Spot silver eased 0.33 percent to $33.05 an ounce.
Platinum edged up 0.06 percent to $1,570.25, while palladium was last at $634.5, up 0.20 percent.
[Reuters]
