Investing.com -- Gold futures inched up on Monday, amid growing possibility of a Greek default and subsequent departure from the euro following a tumultuous weekend of negotiations with its international creditors.
On the Comex division of the New York Mercantile Exchange, gold for August delivery rose 5.30 or 0.45% to 1,178.50, paring earlier gains from overnight trading when it moved above $1,185 an ounce. Gold wavered between 1,173.30 and 1,187.30 on Monday during a choppy day of trading.
Gold likely gained support at 1,162.10, the low from June 5 and was met with support at 1,205.70, the high from June 18.
In Athens, officials announced that banks will remain closed until Thursday after the Greece government imposed a set of capital controls on Sunday aimed at preventing a bank run. On Sunday night queues multiplied outside a host of Greek banks in Athens, hours before the government imposed a law limiting citizens to ATM deposits of €60 a day. Earlier in the day, the European Central Bank capped funding from its Emergency Liquidity Assistance fund to Greek banks at EUR 89 billion in a move that forced the Greek government to close the banks. The banks had been borrowing money from the emergency fund to cover a high volume of deposit withdrawals in recent weeks.
Greece prime minister Alexis Tsipras surprisingly scheduled a referendum for July 5 on early Sunday morning after high-level talks with its international creditors fell apart on Friday. Before talks collapsed, the creditors reportedly offered Greece a €15.5 billion cash-for-reforms package, which included significant pension reforms and hikes on Value Added Taxes. The package reportedly would have allowed Greece to cover its debts through November.
A no vote for the referendum could provide Tsipras with the public support needed to leave the European Union, while a yes vote could compel Greece to return to the negotiating table with its troika of creditors from the International Monetary Fund, European Commission and the EU. Germany chancellor Angela Merkel reiterated on Monday the importance of holding the euro together if Greece leaves the area, while adding that the euro zone is in better position to cope with contagion than it had been during a previous Greek debt crisis several years earlier. Tsipras, meanwhile, was scheduled to address the Greek media on Monday evening.
In the biggest development of the day, a government official in Athens said Greece will not make a €1.6 billion repayment to the IMF on Tuesday, a bundled payment of four loans it owed during the month of June. Also on Tuesday, the final €7.2 billion tranche of a €240 billion bailout to Greece from its creditors will expire without a deal.
Gold is viewed as a safe-haven for investors in periods of severe economic instability.
In overnight trading, EUR/USD plunged more than 1.7% to 1.0955, its lowest level since May 29 amid growing concerns of a Greek default. The U.S. Dollar Index, which measures the strength of the dollar versus a basket of six other major currencies, surged to an intra-session high of 96.69 before falling back sharply to 95.34. While EUR/USD rallied on Monday back to 1.183, it was still down slightly from Friday's close.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery fell 0.061 or 0.39% to 15.707 an ounce.
Copper for September delivery dipped 0.04 or 0.16% to 2.631.