Gold prices dipped sharply in Asia on Monday as investors noted Greece is set to re-open banks later in the day under restrictions, a move that has further eased political risk views along with a pact reached by six major powers last week to ease economic sanctions on Iran.
Gold futures for August delivery plunged 2.12% on the Comex division of the New York Mercantile Exchange to $1,107.90 a troy ounce. Also on the Comex, silver futures for September delivery dropped 1.39% to $14.268 a troy ounce.
Elsewhere in metals trading, copper for September delivery shed 0.71% to $2.476 a pound.
Greek banks are ready to open their branches across the country on Monday after a three-week shutdown, officials said at the weekend, while German Chancellor Angela Merkel called for swift aid talks so Athens could also lift withdrawal limits.
The cautious reopening of the banks, and an increase in value added tax on restaurant food and public transport from Monday, are aimed at restoring trust inside and outside Greece after an aid-for-reforms deal last week averted bankruptcy.
Greek Prime Minister Alexis Tsipras is trying to turn a corner after he reluctantly agreed to negotiate a third bailout, allowing the European Central Bank to top up bank credit lines but prompting a rebellion in his leftist Syriza party.
“Capital controls and restrictions on withdrawals will remain in place but we are entering a new stage which we all hope will be one of normality,” the head of Greece’s banking association Louka Katseli told Skai television.
Markets in Japan are shut on Monday.
Last week, gold plunged to a five-year low on Friday, as upbeat U.S. inflation and housing data boosted expectations for an interest rate hike later this year.
Data on Friday showed that U.S. consumer prices rose 0.3% in June, the fifth consecutive monthly increase, while core prices, which exclude food and energy, increased 0.2% last month, adding to signs of firming inflation.
A separate report showed that U.S. housing starts surged 9.8% to 1.174 million units in June. Analysts had expected housing starts to increase by 6.2% last month.
Meanwhile, U.S. building permits jumped 7.4% to 1.343 million units in June, the most since July 2007, pointing to a rapidly strengthening housing market.
Federal Reserve Chair Janet Yellen said earlier in the week that the central bank was on track to raise interest rates by the end of the year if the economy continues to grow as expected.
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.