"Everyone says this crisis should be good for gold, but no one has made a convincing case on who should be buying gold ... Greeks are going to hold euros." Spot gold was down 0.3 percent at $1,169.10 an ounce at 3:39 pm EDT (1939 GMT), still near the previous session's low of $1,166.35, which was the lowest since June 5. US gold futures for August delivery settled down $2.50 an ounce at $1,169.30. There is scope for the Greek crisis to drive more risk-averse money into gold if it worsens to the point where Greece leaves the euro zone, or if there is contagion into other economies in the bloc, such as Italy, Portugal or Spain, traders said.
Gold is typically regarded as a good bet in times of financial and economic uncertainty. But the metal's underperformance points to broader weakness as investors expect the Federal Reserve to raise US interest rates this year. The dollar gained 0.9 percent against a basket of currencies, mostly because of euro weakness.
"ADP numbers came in strongly today," Mitsubishi Corp analyst Jonathan Butler said, referring to US private employers adding 237,000 jobs in June. "I think that's one of the reasons that gold is off today and there are nonfarm payrolls tomorrow." Spot palladium prices were up 4.2 percent at $697.50 an ounce, their biggest jump in two years in a bounce viewed as corrective after falling 14 percent in June, but also spurred by strong US June auto sales.
"One cannot underestimate the impact motor vehicle sales will have on the palladium market," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago. Palladium is used in autocatalysts. Silver fell 1 percent to $15.59 an ounce and platinum was up 0.4 percent at $1,079.25.