Gold falls on Greece optimism; ends Q2 up 5 percent

NEW YORK Thu Jun 30, 2011 4:30pm EDT

Gold bars are seen in this picture illustration taken at the Czech National Bank in Prague January 31, 2011. REUTERS/Petr Josek

Gold bars are seen in this picture illustration taken at the Czech National Bank in Prague January 31, 2011.

Credit: Reuters/Petr Josek

NEW YORK (Reuters) - Gold fell on the last day of the quarter on Thursday, as hopes that Greece would avoid a debt default eroded safe-haven interest, but secured an 11th consecutive quarterly gain on global economic uncertainty.

Gold snapped a two-session winning streak even as the euro rose against the dollar after Greece passed a crucial austerity plan to secure international aid.

David Meger, director of metals trading at Vision Financial Markets, said that safe-haven bids in gold fell as Greece appeared to avoid imminent bankruptcy. "However, the whole European sovereign debt issue is far from behind us," he said.

The metal is down almost 4 percent in the last six sessions.

Bullion was the quarter's top performer in the metals complex, as lingering economic uncertainty triggered a flight to safety.

(Graphic: r.reuters.com/duj88r)

It's quarterly gain of about 5 percent, compared with declines of 0.5 percent in the S&P 500 .SPX, and about 5 percent loss in Brent crude oil.

Spot gold was down 0.7 percent at $1,500.79 an ounce by 2:50 p.m. EDT. U.S. August gold futures settled down $7.60 at $1,502.80, after trading between $1,500.30 and $1,514.80.

Silver was last down 0.5 percent at $34.59 an ounce, posting a quarterly loss of about 7.5 percent, its first decline after nine straight quarterly gains and its worst since the third quarter of 2008, when the global financial crisis was near its most intense.

Gold's inability to rise further on the back of a weaker dollar could be a warning sign for the third quarter, analysts said.

The dollar lost half a percent against a basket of currencies .DXY. and felt extra pressure from expectations that euro-zone interest rates will rise again next week.<USD/>

"We weren't able to extend gains from being supported by the weaker dollar. There hasn't been a driving force to take this market above its recent resistance level, which obviously might be concerning moving forward," Meger said.

FED STIMULUS IN FOCUS

Others predicted that gold's safe-haven appeal may be retained in the aftermath of the Greek debt crisis, but prices may be range-bound 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.

Investor buying of physical gold, as reflected by changes in holdings of the metal in exchange-traded funds, picked up relative to the first quarter of the year.

Between March and June, some 2.101 million ounces of gold 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.

Spot palladium rose 1.4 percent to $756.75.

Platinum was last down 0.1 percent at $1,723 an ounce, notching its first quarterly decline in a year, down 2.6 percent in the second quarter.

(Additional reporting by Amanda Cooper in London, Rujun Shen in Singapore; Editing by Alden Bentley)

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