Greece default fears boost gold to 1-week high

Investing.com - Gold prices jumped to a one-week high on Monday, as Greece looked set to default on its debt repayment this week, boosting demand for safe-haven assets.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange hit an intraday peak of $1,187.30, the highest since June 22, before trading at $1,183.40 during U.S. morning hours, up $10.20, or 0.88%. Futures were likely to find support at $1,167.10, the low from June 26, and resistance at $1,200.80, the high from June 22.

Greece’s bailout is due to expire on Tuesday, the same day that Athens is due to repay €1.6 billion to the IMF, but without a rescue package in place Greece will almost certainly default.

Greek Prime Minister Alexis Tsipras abandoned negotiations with creditors on Saturday and called for a referendum to be held on July 5 on the terms proposed by lenders for extending the country’s bailout.

A yes vote will mean that Greeks are willing accept the latest reforms offered by creditors to Athens, while a rejection will likely lead to Greece's exit from the single currency union.

A Greek official said Monday that banks would remain closed for six days starting on Monday to avert a crisis in the banking sector after deposit outflows accelerated over the weekend. Withdrawals at ATM machines were to be limited to €60 a day per account.

European stock markets sank on Monday and the yields on Italian, Spanish and Portuguese bonds spiked amid mounting fears that Greece would become the first country to exit the euro zone.

On Friday, gold fell to a three-week low amid indications that the U.S. economy is regaining strength after a recent bout of weakness, supporting the case for higher interest rates later this year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Later Monday, the U.S. is to publish a report on pending home sales.

Also on the Comex, silver futures for September delivery rose 8.4 cents, or 0.53%, to trade at $15.84 a troy ounce, while copper for September delivery inched down 0.7 cents, or 0.25%, to trade at $2.629 a pound.

Copper's losses were limited after the People's Bank of China cut its benchmark interest rate by a quarter percentage point to 4.85% over the weekend from 5.10%, in order to spur economic activity and boost growth.

It was the fourth rate cut since November, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.