SINGAPORE — Gold took a breather yesterday after a three-day rally as a stronger dollar offset gains from safe-haven bids prompted by a breakdown in talks between Greece and its creditors.
Spot gold fell 0,3% to $1 228,01/ounce (oz) by 3:45am GMT. It gained about 1% in the past three sessions.
The dip 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 number two consumer tapers off.
“Some form of consolidation is expected to occur as Asian traders close out positions ahead of the long Chinese New Year holidays,” said Phillip Futures analyst Howie Lee, adding that prices would range between $1 215 and $1 240.
Buying from China has been supportive of gold prices in the run-up to the holiday, when the yellow metal is bought widely for gift-giving.
Premiums on the Shanghai Gold Exchange were firm at $3 to $4/oz, indicative of robust demand.
“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 analysts said in a note dated Monday.
Bullion had been getting support from developments in Europe that triggered safe-haven bids.
Talks between Greece and eurozone 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 as “unacceptable”.
The unexpectedly rapid collapse raised doubts about Greece’s future in the eurozone after a new leftist-led government vowed to scrap the €240 billion ($272,4 billion) bailout, reverse austerity policies and end co-operation with European Union/International Monetary Fund inspectors.
Investors typically seek safety in bullion during economic uncertainty and when riskier assets such as equities take a hit.
But yesterday, a stronger dollar took its toll on bullion as it makes the greenback-denominated metal more expensive for holders of other currencies.
A weaker euro and the expectation of an interest rate hike by the US Federal Reserve some time this year boosted the dollar.
Platinum was up 49c or 0,04% at $1 201,49, while palladium lost $1,99 or 0,25% to $784,36.