Gold Falls as Greek Lawmakers Back Austerity Plan, Easing Risk of Default
Gold declined for the first time in three days in New York as Greece’s drive to stave off the euro area’s first sovereign default curbs demand for the metal as a protection of wealth.
Greek lawmakers backed a bill to authorize an austerity plan required to keep rescue aid flowing after Prime Minister George Papandreou yesterday garnered enough votes for his 78 billion-euro ($113 billion) package of budget cuts and state- asset sales. The metal has declined 4.7 percent from the record set at in early May. Still, gold rose in the second quarter, which ended today, the 11th straight quarterly gain.
“With the sovereign premium lifted, gold needs to find new drivers if it is to regain its highs,” Edel Tully, a London- based analyst at UBS AG, said in a report. Still, prices are “unlikely to fall far. Anyone who wanted to sell gold is likely to have done so in the second half of last week.”
Gold futures for August delivery fell $7.60, or 0.5 percent, to settle at $1,502.80 an ounce at 1:48 p.m. on the Comex in New York. Prices climbed 0.9 percent in the previous two sessions.
Gold has gained 5.7 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Europe’s debt crisis helped bullion reach a record $1,577.40 on May 2. Prices declined as much as 4.4 percent from last week’s highest level to touch a five-week low of $1,490.80 on June 27.
‘Vigilance’ Mode
Luxembourg’s Jean-Claude Juncker, who leads a group of euro-area finance ministers, said the Greek parliament’s decision paves the way for payment of the next aid installment from euro-area governments and the International Monetary Fund.
European Central Bank President Jean-Claude Trichet said on June 28 that policy makers are in “strong vigilance mode” ahead of a meeting next week, supporting expectations for an interest-rate increase. The ECB raised its benchmark rate in April for the first time in almost three years, lifting it by a quarter point to 1.25 percent.
The Federal Reserve’s second round of quantitative easing concludes today. The Fed plans to buy between $4 billion and $5 billion of notes due from December 2016 to June 2018. The purchases will be the last in the central bank’s effort to add $600 billion to the economy, according to its website.
Business activity in the U.S. unexpectedly expanded at a faster pace in June, the Institute for Supply Management-Chicago Inc. said today.
Mexico Reduces Reserves
Mexico reduced its gold reserves by 0.18 metric ton to 105.95 tons in May, according to data on the IMF’s website.
Silver futures for September delivery rose 6.3 cents, or 0.2 percent, to $34.832 an ounce in New York. It fell 8.1 percent in the three months ended today, the first decline quarterly decline since the end of 2008. The metal has risen 13 percent this year.
Palladium futures for September delivery gained $8.75, or 1.2 percent, to $760.65 an ounce, paring the quarterly decline to 0.9 percent. The metal is down 5.3 percent this year. Platinum futures for October delivery were little changed at $1,726.10 an ounce, losing 3.2 percent this quarter.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
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