Fail: Gold can't even rally on a currency crisis

Published Mon, Jul 6 201512:08 PM EDT

Gold, the world's oldest currency and the most basic store of wealth, used to be where the world turned when times got rough. But after a Greek referendum that put the future of the euro in question and an equity bear market in China, bullion has barely budged. Gold futures was little changed through midday Monday after jumping immediately after the Greek "no" vote in overnight trading. Gold is now down almost 2 percent for 2015 and virtually unchanged over the last one month amid these financial shocks. In the past, when a country got ready to abandon a currency, gold typically would fill that void. In 2013, Cyprus—similar to Greece—had a bank holiday of almost two weeks. Gold traded higher by 1 percent during that banking crisis, according to Kensho, a quantitative trading tool. That was a sign of the diminishing returns for the safe haven metal, which jumped more than 70 percent from 2007 through the end of 2009 during the U.S. housing crisis and equity bear market. The answer to this riddle is simple, according to Wall Street strategists and traders. Gold is now just a binary trend on an interest rate increase by the Federal Reserve . It was U.S. central bank money printing that caused the metal to surge eight years ago and so the end of that stimulus will override any safe haven bids. "The lack of influence that the euro crisis is having on gold is particularly noteworthy as the yellow metal continued its recent price decline, underlining again how gold's main role in financial markets at present is as a proxy for the timing and likelihood of a Fed rate hike," wrote Barclays commodities research team to clients Monday. Read More Crisis erupts in Europe...so buy the euro? Expectations of a Fed rate rise is boosting the U.S. dollar, eating away at any returns gold may garner for U.S. investors. "The tricky part here is that, currently, global uncertainty results in a U.S. dollar bid," said Jim Iuorio, managing director of TJM Institutional Services. "If a situation arises where global uncertainty reached a point that the Fed felt it had to pledge lower rates for longer and hint at 'QE infinity' then gold would certainly head higher. However, that situation feels far away at this point." Since there are no real "fundamentals" upon which to base a gold trade, the commodity often trades on chart patterns. "Gold is in, and has been in, a bear market for years by my work (which) I define as price below a declining 200-day moving average," said Jonathan Krinsky of MKM Partners in an email. The U.S. dollar "in a structural bull market only adds more downside pressure. So for me it's not 'What will it take for gold to rally?' it's 'Why is it not breaking down below 1,100 yet?'" Source: FactSet The demand for gold is simply not there. The most popular exchange-traded fund with a mandate to track the price of gold is the SPDR Gold Trust ETF and it, too, is down for 2015. The assets in the fund surged higher in January but have collapsed ever since and remain at the lowest levels of the year, according to Asbury Research. "In the '80s, gold was a major indicator of world events," said David Greenberg of Schaeffer Greenberg Advisors. "Now with so many other products that can be used to hedge or trade around a portfolio, gold has forever lost its luster." Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho. —With reporting by CNBC's Deirdre Bosa .

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Gold, the world's oldest currency and the most basic store of wealth, used to be where the world turned when times got rough.

But after a Greek referendum that put the future of the euro in question and an equity bear market in China, bullion has barely budged.

was little changed through midday Monday after jumping immediately after the Greek "no" vote in overnight trading. Gold is now down almost 2 percent for 2015 and virtually unchanged over the last one month amid these financial shocks.

In the past, when a country got ready to abandon a currency, gold typically would fill that void.