Gold extends losses as rumors of an imminent Greek deal mount

Investing.com - Gold prices extended losses to trade near a three-week low on Tuesday, following a report that efforts to resume negotiations between Greece and its creditors are underway, fueling hopes for a last-minute deal.

Media outlets in Greece reported that meetings were underway to attempt to find a solution to break the impasse by midnight, when Greece’s bailout program officially expires.

A €1.6 billion loan repayment to the International Monetary Fund is also falling due at the same time and without a rescue package in place Athens would almost certainly fall into arrears.

A default by Greece would add to fears over the country’s solvency and fuel doubts over the condition of Greek banks and the collateral they use for European Central Bank loans.

Greece shut down its banking system on Monday, with lenders ordered to stay closed for six days, following a decision by the ECB not to extend a lifeline of emergency funding.

Greece broke off negotiations with creditors on Saturday and in a surprise move Prime Minister Alexis Tsipras called for a snap referendum to be held on July 5 on whether to accept the terms proposed by lenders for extending the country’s bailout.

European finance ministers refused a request from the Greek government to extend the bailout program until after the referendum.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange hit a session low of $1,169.10 a troy ounce, before trading at $1,172.30 during U.S. morning hours, down $6.70, or 0.57%.

Futures were likely to find support at $1,167.10, the low from June 26, and resistance at $1,187.60, the high from June 29.

Gold prices are down almost 2% in June 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.

Data released Monday showed that pending home sales in the U.S. rose to the highest level since 2006 in May.

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 Tuesday, the U.S. is to publish a report on consumer confidence for June.

Also on the Comex, silver futures for September delivery declined 4.2 cents, or 0.27%, to trade at $15.65 a troy ounce, while copper for September delivery slumped 2.2 cents, or 0.84%, to trade at $2.611 a pound.