By Tatyana Shumsky
Gold and silver futures plunged Tuesday as concerns about
Greece's potential exit from the euro buoyed the dollar and swept
precious metals prices lower.
Gold for August delivery, the most actively traded contract,
fell $20.60, or 1.85, to $1,152.60 a troy ounce on the Comex
division of the New York Mercantile Exchange. The contract fell to
$1,151.50 an ounce, the lowest level since March 18.
Silver for September delivery fell to $14.825 an ounce, the
lowest level since Dec. 1, and was recently trading down 5.6% at
$14.865 a troy ounce.
Precious metals have been under pressure in recent weeks, as
expectations for higher interest rates in the U.S. damped interest
in the zero-yielding assets. The Federal Reserve is expected to
raise benchmark borrowing rates in the second half of 2015, the
first such move since late 2006. This is bad news for precious
metals, which don't pay interest or dividends and will struggle to
lure investors from interest-bearing assets like Treasury bonds
when rates climb.
In recent days, concerns about Greece's debt and the future of
the euro prompted investors to sell the common European currency in
favor of the U.S. dollar, adding to the pressure on precious metals
prices. Gold and silver are traded in dollars and become more
expensive for investors who use other currencies to fund their
purchases when the dollar rallies. The WSJ Dollar Index was
recently up 0.7% at 87.88.
"Gold is a dollar story. The dollar strength is the biggest
pressure on commodities today," said Dave Meger, director of metals
trading with High Ridge Futures in Chicago.
The rally in the dollar has also overwhelmed the appeal of gold
and silver as safe places to stash cash during periods of economic
and financial uncertainty, analysts and investors say.
Some investors are also staying away from precious metals amid
optimism the last-ditch efforts between Athens and European
creditors will yield a compromise on Greek debt.
"The (precious) metals' pricing continues to suggest that
traders are expecting a resolution to Greece's 'bankruptcy'," said
Peter Hug, global trading director at Kitco Metals Inc., in a note
to clients.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com