Bloomberg News

Gold Advances for a Second Day on Protests in Greece Before Vote

June 29, 2011

June 29 (Bloomberg) -- Gold increased for a second day as concern about protests and strikes in Greece before the government’s vote on budget cuts boosted demand for the metal as an alternative investment.

Gold for August delivery gained as much as 0.4 percent to $1,506.40 an ounce and was at $1,505.90 at 2:21 p.m. in Singapore. The price has lost 2 percent this month. The immediate-delivery contract was 0.3 percent higher at $1,505.28 an ounce.

“One of the key things we might get is some form of risk premium built into the market if social unrest starts to pick up,” said Jonathan Barratt, managing director of Commodity Broking Services Pty. in Sydney. “If they see some social unrest, they can see instability again. Those sorts of things suggest a flight back to some sort of security.”

Greek Prime Minister George Papandreou’s 78 billion euro ($112 billion) plan to cut spending and sell assets is set for a vote in parliament today. Papandreou won a confidence vote in parliament last week by a vote of 155-143.

Greece’s parliament remains the focus of protests that yesterday clogged Athens’ city center with more than 20,000 people in the first half of a 48-hour general strike. Thirty seven police were injured and clouds of tear gas filled the air as hooded youths wielding clubs smashed windows at a McDonald’s Corp. restaurant and burned vehicles.

“There are challenges ahead and no 100% guarantee that parliament will enforce austerity measures right away,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote in a report yesterday. “We still believe that, despite the latest pullback, escalating risk aversion could still push bullion back to May highs, with resistance around $1,568 and $1,570, should the situation in the Eurozone worsen.”

Tear Gas

At 10:30 p.m. last night, police estimated the crowd outside Parliament at 8,000. Officers used more tear gas to fight off protesters rushing fences around the legislature.

“We anticipate that everything will be alright, that we’ll get the green light for the austerity measures,” Barratt said.

Failure to pass the two bills may lead to the euro area’s first sovereign default as Greece needs to cover 6.6 billion euros of maturing bonds in August. Greek government officials have said they may also not have cash to pay wages and pensions by mid-July.

Germany’s biggest banks and insurers will meet with the Finance Ministry in Berlin today as they seek to reach an agreement on their contribution to a Greek aid package.

German and French lenders are the biggest European holders of Greek debt and their participation in the plan is key to the European Union goal of getting banks to roll over at least 30 billion euros of bonds.

Silver for September delivery climbed 1.5 percent to $34.17 an ounce, while the metal for immediate delivery gained 0.6 percent to $34.1613 an ounce. Spot palladium was 0.3 percent higher at $743.50 an ounce, and cash platinum increased 1 percent to $1,707.50 an ounce.

--Editors: Ovais Subhani, Thomas Kutty Abraham

To contact the reporter for this story: Phoebe Sedgman in Wellington at psedgman2@bloomberg.net; Sungwoo Park in Seoul at spark47@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.


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