June 18, 2012 / 1:11 AM / 6 years ago

PRECIOUS-Gold snaps 6-day winning streak after Greek vote

* Optimism likely to be short-lived, to check drop in gold
    * Specs raise gold, silver longs
    * Spot gold looks neutral -technicals  

 (Updates prices)
    By Lewa Pardomuan and Manolo Serapio Jr
    SINGAPORE, June 18 (Reuters) - Gold fell for the first time
in seven sessions on Monday as the risk of a Greek exit from the
euro zone subsided after parties backing a bailout for the
country won an election, denting the metal's safe-haven appeal.
    The initial vote results drew expressions of relief from the
Group of Seven industrialised economies, who said it was in "all
our interests" for Greece to stay in the euro while respecting
its international bailout commitments. 
    Increased appetite for riskier assets pushed money out of
gold, which fell more than 1 percent to a low of
$1,606.49 an ounce. It later recovered to $1,621.60 an ounce by
0629 GMT, still down $6.19. Bullion is more than $200 below a
record of around $1,920 struck in September last year.
    But losses are expected to be checked, as the optimism
stemming from the Greek poll outcome and the rally in risky
assets is likely to be short-lived given high borrowing costs in
Spain and Italy and the continued threat to the global economy
from the region's debt crisis. 
    "I think we still have to see whether Greece can form a
government," said Ronald Leung, director of Lee Cheong Gold
Dealers in Hong Kong, adding that investors would now turn their
attention to concerns over a faltering U.S. economy.
    "Sentiment is a bit mixed. Everybody is taking profits for
the time being. If (FOMC) launches the QE3, of course the market
will be moving up." 
    Investors are looking for hints for another round of
quantitative easing (QE) in the United States when the Federal
Open Market Committee releases a policy statement at the end of
its two-day meeting on Wednesday.
    Previous rounds of asset purchases by the Fed to drive down
interest rates and stimulate the economy had weakened the U.S.
dollar and boosted global stock markets, while polishing up
gold's appeal as a hedge against inflation.
      
    
    
    The euro  briefly hit a one-month high against the U.S.
dollar after the Greek poll results, but light volumes indicated
dealers were still cautious on how the result would pan out.
       
    Gold, which often tracks movements in the euro, ignored
gains in the single currency, but data from the Commodity
Futures Trading Commission (CFTC) indicated investors were still
generally bullish on gold. 
    Money managers raised their net length in gold by 1,258
lots, or around 1 percent, to 99,684 lots in the week to June
12, as signs of a slowing in the U.S. economic recovery and the
euro zone debt crisis fuelled speculation of monetary stimulus
from central banks around the world. 
    U.S. gold futures for August delivery dropped $5.10
an ounce to $1,623.00 an ounce.     
      
    LESS CENTRAL BANK PURCHASES, INDIAN DEMAND 
    Dominic Schnider, executive director for wealth management
research at UBS, who does not expect the Fed to launch a third
round of quantitative easing, said he saw gold at around $1,600,
or even at $1,520 by year-end.
    "The gold market is oversupplied by at least 400 tonnes this
year. We have less central bank purchases, less Indian jewellery
demand and you have ETF flows which are not growing," he said.
    "And to do a really proper QE, you need to have a very, very
lousy macroeconomic data, much worse than what we have seen
recently." 
    Top gold consumer India has entered the monsoon season,
marked by a slump in gold purchases. China's jewellery market is
also entering a summer lull, with no major festival in sight
until early October.  
        
  Precious metals prices 0629 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1621.60   -6.19   -0.38      3.70
  Spot Silver        28.57   -0.10   -0.35      3.18
  Spot Platinum    1492.75   16.95   +1.15      7.16
  Spot Palladium    628.75    5.55   +0.89     -3.64
  COMEX GOLD AUG2  1623.00   -5.10   -0.31      3.59        21739
  COMEX SILVER JUL2  28.54   -0.20   -0.71      2.22         4415
  Euro/Dollar       1.2702
  Dollar/Yen         79.19
 
  COMEX gold and silver contracts show the most active months
   

 (Editing by Clarence Fernandez)
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