Gold Prices Drops As Greece Bailout Agreement, Fed Rate Outlook

Gold Prices Drops As Greece Bailout Agreement, Fed Rate Outlook

Greece agreed with its creditors on the necessary reforms to start formal negotiations on a third rescue program in five years and stay in the euro. Image Source:

Prices of gold futures fell on Monday after Greece took the third bailout deal after marathon overnight talks with the European leaders, and as investors weigh the timing of an increase in interest rates by the United States Fed.

Greece agreed with its creditors on the necessary reforms to start formal negotiations on a third rescue program in five years and stay in the euro. Gains in the dollar added to the selling pressure on gold, which has posted three consecutive weekly declines.

On the Comex in New York., Gold futures for delivery in August fell 0.4 percent to $1,153.30 an ounce.

European Council President Donald Tusk said early Monday that a program for Greece was “all ready to go”, “with serious reforms and financial support”.

Greek Parliament has to pass new legislation on Monday and Tuesday to put into practice arrangements agreed in Brussels, including the pension reform and a new regime of sales tax. The parliaments of several countries in the euro zone will also have to approve any new rescue.

The Eurogroup chairman Jeroen Dijsselbloem said talks on the bridge financing for Greece will start immediately, to help meet their payments on the debt this summer. He also said that € 50 billion of Greek state assets be set aside in a fund to help recapitalize Greek banks.

European stock exchanges surged on the news, with the French CAC 40 leaping 2% and the German DAX 30 increased 1.5%.

Greek agreement reduces demand for the metal as a hedge asset, extending losses as signs that the Fed plans to raise interest rates. Fed President Janet Yellen, maintained its request a rate increase this year, curbing the attractiveness of bullion, which does not pay interest or provide returns as other assets like stocks and bonds.

Holdings in exchange-traded products backed by gold fell for a third Friday session, declining 1.3 metric tons to 1585.3 tons, near the lowest rate since 2009.

The Indian rupee on Monday closes weaker against US dollar at 63.51, while opening at 63.45 a dollar and touched a high and a low of 63.40 and 63.52, respectively in intra-day trade.

Besides in the domestic marketplace, at the Multi Commodity Exchange Gold prices were trading firm on Monday. The MCX Gold October contract was trading at Rs 26315 up Rs 32, or 0.12 percent.

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