Gold Rallying On Safe Haven Trading

Gold gained $8.50 in the Asian session as traders looked for safety to protect them from the unknown generating from Greece and the Eurozone. Gold is trading at 1181.70 at the same time silver gained 97 points to 15.865 while platinum diverged giving up $5.45 to reach 1078.65.  Greek headline chasing will be a familiar theme in the U.S. markets this week after the embattled country failed to convince its creditors over the weekend for an extension on its rescue package. Finance Minister Yanis Varoufakis made the request, during a meeting in Brussels with his Eurozone counterparts, which was immediately rejected.

The move follows an announcement that the Greek government will seek a referendum to allow voters a say in whether the country should accept tax hikes and spending cuts in exchange for a new bailout deal. Parliament later approved the proposal. The latest developments raise the probability of Greece defaulting on its $1.7-billion payment to the International Monetary Fund due on Tuesday and prompted renewed speculation of Greece losing its membership in the Eurozone.

In times of geopolitical uncertainty precious metals, especially gold get a boost from safe haven trades. This morning’s gain was less than expected. The slump in global equities sent investors rushing towards safe-haven assets such as gold and the Japanese yen.

“The main worry as Monday trading begins is the potential contagion to other euro zone countries and also the future of the euro,” Ole Hansen, head of commodity strategy at Copenhagen-based Saxo Bank, said in an email before the start of trade on Monday. “Gold has an opportunity under these circumstances to reassert its role as a safe haven and we should see the metal being bought.”

The failure to reach a deal with creditors leaves Greece set to default on 1.6 billion euros of loans from the International Monetary Fund that fall due on Tuesday. Athens must repay billions of euros to the ECB in the coming months.

The impending default on the IMF loans leaves Greece sliding towards a euro exit and also carries broad implications for the global financial system. Prime Minister Alexis Tsipras late on Friday surprised creditors by calling a snap referendum on what he said were the unacceptable terms offered to keep the country from bankruptcy.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.25 percent to 711.44 tonnes on Friday. U.S. Commodity Futures Trading Commission data on Friday showed speculators upped a bullish bet in COMEX gold futures and options and switched to a net short position in silver in the week ended June 23.

Gold is little changed this year as traders focus on when the US Federal Reserve’s first interest-rate increase since 2006 will happen. Higher borrowing costs curb bullion’s allure because it doesn’t pay interest or give returns like other assets such as bonds and equities.

The stronger US dollar weighed on base metals this morning with copper falling 6 points to 2.629 gaining little traction from the interest rate reduction by the PBOC announced over the weekend.