Gold May Gain for First Time in Four Days Before Greek Vote on Budget Cuts

http://www.bloomberg.com/news/2011-06-28/gold-may-advance-for-first-time-in-four-days-ahead-of-greek-austerity-vote.html
By Sungwoo Park

Gold may gain for the first time in four days, snapping the worst run in more than a month, before a vote tomorrow by Greek lawmakers on budget cuts that rekindled concern over the region’s debt crisis. Silver rebounded.

Immediate-delivery bullion was little changed at $1,500.10 an ounce at 10:39 a.m. in Seoul after gaining as much as 0.4 percent to $1,503.32. The metal lost 3.3 percent in the past three days and touched a one-month low as concern over Greece eased and commodities including oil fell. The August-delivery contract rose 0.3 percent to $1,501.50 on the Comex in New York.

“The risk of European sovereign-debt crisis is still there,” said Park Jong Beom, a trader at Tong Yang Securities Inc. “The price won’t likely fall below $1,470.” The metal touched $1,490.85 yesterday, the lowest level since May 20.

Greek lawmakers vote on a five-year austerity plan that must back for the nation to secure more international aid. Failure to pass the plan may lead to the euro area’s first sovereign default. U.S. consumer spending unexpectedly stagnated in May as employment prospects dimmed and prices climbed.

Bullion has rallied 5.6 percent this year and is set for an 11th year of gains. The price reached a record $1,577.57 on May 2 as Greece’s debt crisis and record-low U.S. borrowing costs boosted demand for an alternative to currencies.

‘Monetary Easing’

“The expectation that U.S. monetary easing will continue for a while even after the termination of the quantitative easing is still in the background, providing another reason to support gold,” said Tong Yang’s Park.

Gold will be the best-performing asset for the rest of the year, UBS AG analyst Edel Tully said in a report yesterday, citing a survey of sovereign institutions. The desire to reduce holdings within 10 years has disappeared, she wrote.

Holdings in exchange-traded products backed by gold rose about 4.4 metric tons to 2,065.7 tons in the three to June 27, according to data compiled by Bloomberg from 10 providers.

Silver for immediate delivery, which touched the lowest level since May 17 yesterday after dropping for three days, advanced 0.6 percent to $33.7650 an ounce. The price has climbed about 9.2 percent this year.

Spot platinum advanced 1 percent to $1,690.25 an ounce, while cash palladium was little changed at $729.75 an ounce.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net