Gold futures ended marginally lower but ended the week higher after the Dollar gained against a basket of foreign currencies on renewed fears that Greece would default from its loans and exit the Euro.
Gold for August delivery slipped 10 cents to end at $1201.90 a troy ounce on the Comex Division of the New York Mercantile Exchange. Tracking the most active contracts, gold ended the week 1.9% higher.
Gold had jumped to a three month high on Thursday bolstered by a dovish policy statement from the Federal Reserve.
The Fed stated after its two days policy meeting that it would only raise the country’s interest rates after further improvement in the labor market and a further rise in the inflation.
A hike in the interest rates would dent the demand of none interest-bearing commodities like gold which depend on price changes for profitability.
“Despite this week’s dovish message from the Fed, we are fundamentally closer to a U.S. rate hike,” Danske Bank senior analyst Jens Pedersen told Reuters.
“The rate move, a stronger dollar and the re-pricing of the U.S. yield curve will limit any upside.”
Gold, however, reversed these gains on Friday after the dollar strengthened on a deadlock between Greece and its international lenders over a potential bailout deal for the country.
The leaders of the Euro zone are expected to hold an emergency session on Monday night to decide whether or not to allow Greece to print its own currency and exit the Euro and to avert a possible default after acceleration in bank withdrawals and slump in revenue collection.
“There are now fears that there could be a run on Greek banks, as the banking system would probably cease to function properly in the event of national bankruptcy. This should lend good support to the gold price,” an analyst at Commerzbank , told the Wall Street Journal.
A robust greenback is bearish for the demand of commodities denominated in dollars like gold as it makes them harder to afford to holders of other currencies.
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