DUBAI: 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.
Asian shares were near to eking out a sixth session of gains on Wednesday as investors strove to stay optimistic on the chance of a Greek debt deal, while the dollar held firm as the prospect of US rate rises swung back into view.
“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 0.2 per cent to $1,176 an ounce by 0715 GMT (10.15am UAE time), after losing 0.6 per cent on Tuesday. It hit a session low of $1,174.7, the 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 said on Tuesday 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 US economy is on track to grow 2 per cent in the second quarter.
Strength in the dollar, which is benefiting from upbeat US 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.
