Tuesday, 14 July 2015 17:10
LONDON: Gold eased on Tuesday, extending the previous session’s losses, as investors switched attention from the fading prospect of a Greek exit from the euro zone to the potential for a US interest rate increase later this year.
Greece and its international creditors struck a conditional agreement on Monday that saw it surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86 billion euro ($ 95 billion) bailout.
While caution lingers over the deal, with Greek Prime Minister Alexis Tsipras facing a showdown with his own party over the austerity package, European stocks are holding the bulk of Monday’s gains, suggesting risk aversion has eased somewhat.
Spot gold was down 0.4 percent at $ 1,153.21 an ounce at 0930 GMT, while US gold futures for August delivery were down $ 3.00 an ounce at $ 1,152.40. “The Greek situation kept gold prices around $ 1,160-1,170, but once an agreement was announced, the price dropped,” Natixis analyst Bernard Dahdah said.
“Once you’ve sorted out the things that give potential upside for gold, the next thing to look at would be the possibility of a rate hike.”
Gold tends to come under pressure as interest rates rise, as higher rates boost the opportunity cost of holding the metal, while lifting the dollar, in which it is priced.
Expectations for a rate hike have pushed gold down 2.5 percent this year.
Federal Reserve Chair Janet Yellen may provide more signals of a looming rate rise at her semiannual testimony to Congress on Wednesday and Thursday.
Yellen said on Friday the US central bank was on course to raise interest rates at some point later this year, the first hike in nearly a decade, though labour markets remained weak. Among other commodities, oil prices fell 1.5 percent after Iran and six world powers reached a historic nuclear deal expected to increase the supply of Iranian crude on world markets.
From a technical perspective, gold looks vulnerable to further losses, according to analysts who study past price patterns to determine the next direction of trade.
“The metal is trading in a short-term bearish trend channel off the May 18 high of $ 1,232, marked by lower highs and lower lows,” ScotiaMocatta’s technical team said in a note.
“The risk is a test in the near term of the March low of $ 1,142, a breach of which would open up the $ 1,131 low from November 2014.” Silver was down 1.1 percent at $ 15.33 an ounce, platinum was down 1 percent at $ 1,022 an ounce and palladium was down 0.4 percent at $ 654.25.
