SINGAPORE — Gold edged higher yesterday, after earlier dropping to a five-week low, as confusion over Greece’s debt negotiations with its European lenders dominated markets, drumming up some safe-haven bids for the metal.
Spot gold fell to $1 216,45/oz, its lowest since January 9, before recovering to trade up 0,1% at $1 220. The metal lost 1,2% on Wednesday as the dollar hit a three-week peak against a basket of major currencies on weakness in the euro and the yen.
“We continue to see a conflicted gold market with the market split between bears and bulls as the US dollar strength improves against global economic issues and safe-haven demand,” ANZ analyst Victor Thianpiriya said.
Gold, seen as a safe-haven asset, tends to get a boost during times of economic and geopolitical uncertainty.
Financial markets are under pressure as eurozone finance ministers were unable to agree with Greece a final statement or a way to continue talks until their next meeting on Monday, following hours of discussions in Brussels to extend an international bailout.
Greek Finance minister Yanis Varoufakis played down a failure to reach a common position with the rest of the eurozone, saying he believed a “healing deal” on Greece’s finances could be reached on Monday.
The uncertainty knocked down Asian stocks and the euro on Thursday as markets feared that Greece could exit the eurozone if it fails to reach a deal.
Gold’s sell-off for much of this week despite the Greek issue suggests that markets are either expecting an ultimately positive result, or they may be discounting the country’s possible exit as a net positive, INTL FCStone analyst Edward Meir said.
“We also have to suspect that with a Federal Reserve rate increase in the offing and US equity markets looking much steadier, gold is finding it difficult to gain traction on the upside,” Meir said.
The Fed should raise interest rates in June, a top Fed official said earlier this week, saying the US economy was strengthening and inflation would move back to the central bank’s target.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the US economy, could further strengthen the dollar and in turn hurt demand for bullion, a noninterest-bearing asset. Platinum was down 35c or 0,03% at $1 190,25, while palladium gained $1,10 or 0,14% to $766,50.