Gold snaps three-day rally after Greece talks collapse

Spot gold fell 0.8 percent to $1,220.84 an ounce by 1252 GMT, erasing most of the gains accumulated over the past three sessions

Published: Updated:
Read Mode
100% Font Size
3 min read

Gold snapped a three-day rally on Tuesday, losing almost 1 percent as investors remained cautious after a breakdown of debt talks between Greece and euro zone finance ministers, while demand from China decreased ahead of the Lunar New Year holiday.

Spot gold fell 0.8 percent to $1,220.84 an ounce by 1252 GMT, erasing most of the gains accumulated over the past three sessions, when the metal was bolstered by a weaker dollar and uncertainty around Greece.

Investors typically seek safety in bullion during economic uncertainties and when riskier assets such as equities take a hit.

But hopes that a compromise would eventually be reached between Greece and international lenders deterred investors from increasing their exposure to gold.

The metal fell as broader market sentiment was not in panic mode, with equity markets outside Greece edging up.

Talks between Greece and euro zone finance ministers over the country’s debt crisis broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout package.

Both sides raised the prospect of another attempt to find common ground before the end of this week. The European Central Bank is set to decide on Wednesday whether to maintain emergency lending to Greek banks.

“It is hard for gold investors to get a steer from Greece at the moment,” Macquarie analyst Matthew Turner said.

“Greece was never behind the rally in gold this year, that was more to do with central banks’ actions around the world.”

The market was awaiting the minutes from the latest U.S. Federal Reserve’s meeting on Wednesday for clues around an expected interest rate hike.

“Minutes will be closely watched see what policymakers’ sensitivity is to a June rate hike,” Turner said.

The dip in gold prices comes on the last trading day before China heads for a week-long Lunar New Year holiday, after which prices could take a further hit as buying from the No.2 consumer tapers off.

Buying from China has been supportive of gold prices in the run up to the holiday, when the precious metal is bought widely for gift-giving. Premiums on the Shanghai Gold Exchange were firm at $3-$4 an ounce.

“Demand in China has certainly been price responsive, but interest tends to taper off after the Lunar New Year, leaving [gold] prices more exposed,” Barclays said in a note.

Silver fell 2.9 percent to $16.70 an ounce. Platinum lost 0.4 percent at $1,192.99 an ounce, while palladium was down 0.7 percent at $781.05 an ounce.

Top Content Trending