Gold fell on Thursday, although still heading for an 11th consecutive quarterly gain, as growing investor confidence that Greece would avoid a debt default dented perceived safe-haven assets. The euro maintained gains against the dollar after the Greek government passed a law to impose steep budget cuts to secure an emergency bailout and avoid the eurozone's first sovereign default.
Gold has over the past three months been a major beneficiary of investor anxiety over Greece's potential to affect the rest of the eurozone economy, the triple disaster in Japan and the outlook for global economic growth. The precious metal is set for a quarterly rise of 5.5 percent, compared with declines of 1.4 percent in the S&P 500, 4.8 percent in crude oil and 2.8 percent in emerging equities. Spot gold was down 0.5 percent at $1,503.81 an ounce by 1412 GMT after rising for two straight sessions. US gold was down 0.4 percent at $1,504.30.
"Gold did go up on worries about the whole Greek situation, so to some extent that money is coming out. I think the important thing really is gold will do very well in the months ahead, mainly because we can see a lot of Asian buying pick-up on dips," said Standard Chartered analyst Daniel Smith.
"We are in an economic upswing even though it is quite bumpy, so what will happen is we will see more money diverted into gold as people's incomes rise, particularly in places like China," he added. The dollar lost nearly quarter of a percent against a basket of currencies as the euro rallied after the Greek austerity vote, although the safe-haven Swiss franc fell.
Weakness in the dollar would normally give gold a lift, because it cuts the cost of buying it for non-US investors. But this inverse link to the currency can sometimes erode. Gold's safe-haven appeal is likely to be retained in the aftermath of the Greek debt crisis, but prices may be trapped in a range in the short run due to lack of speculative interest. "We need to see if fund buying is coming back, which will largely depend on whether there will be more stimulus plans in the United States after the current round of quantitative easing ends," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers.
So far in the second quarter of the year, investor buying of physical gold, as reflected by changes in holdings of the metal in exchange-traded funds, has picked up relative to the first quarter of the year. Between March and June so far, some 2.101 million ounces of gold have flowed into the major ETFs, according to Reuters data, compared with an outflow of 2.271 million ounces in the first three months of the year. Silver was last down 0.8 percent at $34.48 an ounce, on course for a 7 percent quarterly loss, its first after nine straight quarterly gains and its worst since the third quarter of 2008, when the global financial crisis was approaching its most intense.
Spot palladium outperformed the precious metals complex, rising 1.3 percent to $755.97, but remained on course for its second straight month of losses. Palladium remained the worst performing precious metal this year, down more than 5 percent so far. Platinum was last down 0.4 percent at $1,717.74 an ounce, having hit three-month lows this week and set for its first quarterly decline in a year, down 2.7 percent in the second three month of 2011.