Gold futures declined on Thursday after a breakdown in high level talks between the Greek government and the International Monetary Fund (IMF), heightening fears of a Greek default in its loan repayments.
Gold futures on the New York Mercantile Exchange for August delivery fell by 0.66% or $7.60 to $1178.90 as traders locked in profits. Gold traded in a narrow range between $1175.00 and $1187.40 during Thursday's trade.
Price support for this precious yellow metal was at the level of $1162.10 reached on the 5th of June while the higher resistance level of $1204.71 from June 1 was not breached.
Interestingly, news that he IMF had halted talks with Greece and were returning to Washington had little impact on the gold price.
The leftist Greek Government, led by Alexis Tsipras, was elected on an anti-austerity program by an electorate not willing to accept the harsh cutbacks put in place by the previous government. Following an inconclusive two hour meeting with European Commission President Jean-Claude Juncker, Tsipras addressed reporters before his return to Greece saying, “We’re working in order to bridge the remaining differences and especially the difference on financial issues. We’re working to assure an agreement which will ensure that Greece will recover with social cohesion and viable public debts”. The last part of the statement is in line with Greek voter sentiment expressed during the recent elections.
Greece has an obligation to repay 1.5 billion euros to the IMF before month end and amid fears of a default on this debt, IMF Chief Christine Lagarde will probably be present at negotiations when Eurozone finance ministers meet in Luxembourg next week.
Further affecting the gold price, release of recent upbeat economic data by U.S. agencies has had a positive effect on the dollar which was has seen values pushed significantly higher. The reality for investors is that commodities such as gold which are USD denominated become more expensive for foreign buyers as the USD appreciates.
The U.S. Commerce Department announced substantially higher retail sales for May while the Census Bureau announced an increase in business inventories of 0.4% for April, higher than the forecasts of a 0.2% gain. In a separate report, the Department of Labor said there were only marginal gains in initial jobless claims with an increase of only 2,000 which was below expectations.
There was further good news for the greenback in Thursday afternoon trading when the Federal Reserve announced the first contraction in federal government debt since 2003 during the first quarter of 2015. The US Dollar Index which reflects the value of the USD relative to the other six major currencies gained 0.63%, climbing to 95.19.
Trade Commodity CFDs on STOCK.com with full training given to all clients