Gold futures drop on Greek relief, US rates outlook

Gold fell for a third day on Monday after Greece secured a crucial deal with its creditors, setting the path toward a new bailout, while investors gauged the possibility of a US interest rate hike in as early as September.

Gold futures for delivery in August traded 0.38% lower at $1 153.5 per troy ounce at 14:34 GMT, shifting in a daily range between $1 163.9 and $1 149.8. The precious metal fell 0.1% on Friday to $1 157.9, settling the week 0.5% lower, a third straight weekly drop.

Gold, which is typically used as an alternative investment during times of economic and political instability, extended its drop as an all-night debate between European leaders ended Monday morning with Greece agreeing to creditors requirements on the reforms needed to start a third bailout program that would keep the indebted country in the Eurozone.

The deal removed an important risk factor from the market, denting the metals safe haven demand and leaving its valuation primarily dependent on its inverse relation to the US dollar and investors expectations for the first US rate hike in a decade. However, analysts projected that with the lack of significant safe-haven bids prior to the Greek deal, downside movement after Mondays meeting will likely not be extensive.

Michael Lewis, analyst at Deutsche Bank, said for CNBC: “Gold is still driven by the interest rate situation in the U.S. We are 50/50 between a rate hike in September and one in December and thats part of the reason we are seeing gold falling towards $1,100 in the fourth quarter.”

Federal Reserve Chair Janet Yellen suggested in a Friday speech on the US economic outlook that the central bank remains on course to initiate in 2015 its first increase in borrowing costs since before the financial crisis. Ms. Yellen underscored the US labor markets continued weakness but said that the worlds biggest economy is expected to grow steadily for the remainder of the year.

The US dollar index for settlement in September rose 0.6% to 96.745 by 14:34 GMT, shifting in a daily range of 96.825 – 95.730. The US currency gauge fell 0.6% on Friday to 96.172, closing the week 0.1% lower.

Pivot points

According to Binary Tribune’s daily analysis, August gold’s central pivot point on the Comex stands at $1 159.6. If the contract breaks its first resistance level at $1 162.8, next barrier will be at $1 167.7. In case the second key resistance is broken, the precious metal may attempt to advance to $1 170.9.

If the contract manages to breach the S1 level at $1 154.7, it will next see support at $1 151.5. With this second key support broken, movement to the downside may extend to $1 146.6.

In weekly terms, the central pivot point is at $1 159.4. The three key resistance levels are as follows: R1 – $1 172.9, R2 – $1 187.9, R3 – $1 201.4. The three key support levels are: S1 – $1 144.4, S2 – $1 130.9, S3 – $1 115.9.