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Gold gains in Asia as Greece faces five-day deadline for reform package

Published 07/07/2015, 08:27 PM
Updated 07/07/2015, 08:28 PM
© Reuters.  Gold up in Asia as Greece deadline set

© Reuters. Gold up in Asia as Greece deadline set

Investing.com - Gold prices gained in Asia on Wednesday as a hard deadline was set for Greece to present a credible reform package to enable it to receive loans and open its banking system.

Greece has a five-day deadline to submit a detailed package of reforms to international creditors in return for a bailout or risk the "bankruptcy" of both the country and its financial system, European Council President Donald Tusk and Commission President Jean-Claude Juncker warned Tuesday.

In a high-stakes atmosphere that followed a meeting of euro zone leaders in Brussels after Greece's Sunday austerity referendum, Tusk and Juncker did not mince words.

"The stark reality is that we have only five days left to find an ultimate agreement," Tusk said. "Until now I've avoided talking about deadlines, but tonight I have to say it loud and clear: the final deadline ends this week."

"If there's no deal, it will mean all the possible consequences, including the worst-case scenario, where all of us will lose," Tusk continued. "Failure to find an agreement will lead to the bankruptcy of Greece and the insolvency of its banking system."

On the Comex division of the New York Mercantile Exchange, gold for August delivery rose 0.18% to 1,154.70 a troy ounce.

Silver for September delivery jumped 0.75% to $15.082 a troy ounce,while copper for September delivery slumped 0.64% to 2.455 a pound.

Overnight, gold futures plummeted to a three-month low amid a stronger dollar, as widespread concerns related to the Greek Debt crisis and the plunging Chinese equities market continued to weigh.

Greece could lose complete access to emergency aid from the European Central Bank if it is unable to meet a €3.5 billion obligation on July 20. Without receiving liquidity assistance from the ECB, banks throughout the nation could become insolvent triggering a Greek exit from the euro. On Tuesday, EUR/USD fell more than 0.8% to an intraday low of 1.0917, its lowest level in more than a month.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

In China, the Shanghai Composite Index fell 1.3% amid a record decline in margin speculation. Over the last month, the index is down more than 25% as the world's second-largest economy deals with its slowest growth in more than a decade.

Although the People's Bank of China has looked to jumpstart equities by cutting its benchmark interest rate, easing regulations on margin trading and lowering the amounts Chinese banks must hold on reserves, the stimulus measures have yet to create a rally.

China is the world's largest producer of gold and the second-largest consumer behind India.

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