Melbourne - Gold rose with silver as Greece shut banks and imposed capital controls, boosting demand for haven assets amid concern that the country’s euro membership is in jeopardy.
Bullion for immediate delivery rallied as much as 1.1 percent to $1,188.23 an ounce and was at $1,182.76 at 11.07am in Singapore, according to Bloomberg generic pricing. Gold for August delivery jumped 1.2 percent to $1,187.60 on the Comex and traded at $1,181.50.
Optimism that Greece and its creditors would reach a deal, which hurt bullion prices last week, vanished after midnight on Friday as Prime Minister Alexis Tsipras surprised counterparts by calling for a July 5 referendum on austerity measures demanded by creditors. Tuesday marks the expiry of Greece’s bailout package as well as the deadline for a payment to the International Monetary Fund. Gold’s advance came as the euro sank against the dollar and global equities retreated.
“The main worry as Monday trading begins is the potential contagion to other euro zone countries and also the future of the euro,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank A/S, said in an email before the start of trade on Monday. “Gold has an opportunity under these circumstances to reassert its role as a safe haven.”
European officials discussed quarantining Greece from the rest of the currency bloc, while keeping it from spinning out of the euro’s orbit. Allianz SE’s chief economic adviser Mohamed El-Erian said on Monday he saw an 85 percent chance that Greece will be forced to leave the euro zone.
Dollar strength
Gold is little changed this year as traders focus on when the US Federal Reserve’s first interest-rate increase since 2006 will happen. Higher borrowing costs curb bullion’s allure because it doesn’t pay interest or give returns like other assets such as bonds and equities.
The euro lost 1.4 percent to $1.1011. The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, climbed 0.5 percent on Monday and is 4.8 percent higher this year. An appreciating dollar tends to curb gold’s gains.
The “upside in gold will be damped by a higher dollar”, Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by email on Friday. “We are optimistic on the US economy and therefore on rate hikes.”
Bullion of 99.99 percent purity rose as much as 0.9 percent to 237 yuan a gram ($1,187.12 an ounce) on the Shanghai Gold Exchange, and traded at 236.30 yuan.
Silver for immediate delivery climbed as much as 1.7 percent to $16.0741 an ounce, and was at $15.89. Platinum fell 0.4 percent to $1,077.99 an ounce, extending a sixth weekly drop. Palladium dropped 0.3 percent to $677.05 an ounce.
* With assistance from Jasmine Ng in Singapore
Bloomberg