Gold News

Gold Prices Fall as Greece Requests 3rd Bail-Out as 2nd Expires

GOLD PRICES fell Tuesday lunchtime in London, dropping to $1170 and losing 1.5% from yesterday's brief 4-session high as stock markets recovered and energy prices steadied as Athens formally requested a third Eurozone bail-out, specifically asking for a reduction in Greece's outstanding debt.

The Euro held flat with last week's level around $1.12 on the FX market, helping pull the gold price in single currency terms down to €1042 per ounce, more than 4% below Monday's spike to 4-week highs.

Greek bond yields leapt again as prices sank, rising above 14% per annum on 10-year debt, as Athens confirmed it won't repay €1.6 billion due to the International Monetary Fund today.

"It is too late now for an extension of the [existing] programme," an unnamed German official told Reuters this morning, ahead of Sunday's Greek referendum on 'yes' or 'no' to accepting the terms of the current bail-out, which expires Wednesday.
 
Greek prime minister Tsipras meantime wrote to the Eurozone’s €500bn rescue fund asking for a new 2-year program.

"The situation in Greece was the catalyst for a broad based sell-off in global markets on Monday," says a trading note from Swiss refiner MKS.

"It was a disappointing day for the precious complex considering the turmoil and uncertainty surrounding the Greek situation."

"There is no evidence," says Germany's former London gold price benchmark participant Deutsche Bank, "to suggest that the investor community has been positioning for a Greek default or, in the extreme, Grexit.

But while "the events in Greece over the weekend are likely to provide some upside risks to gold in the near term," it adds, "history suggests that the positive effect of financial or geopolitical shocks on the gold price have tended to be more muted and have faded more rapidly over time."

"Attempting to link Greece to gold is a serious waste of time," writes London brokerage Marex Spectron's David Govett.

"Gold is not a safe haven and proved that once again yesterday after a predictable knee-jerk $10 up move...The main movement will obviously occur in the Euro, which in turn may influence gold slightly. But overall the precious metals are governed by the Dollar and Fed announcements."

Looking at the technical picture on gold price charts, "Recent upside attempts have been thwarted [at] $1205...[the] 200-day moving average," says Germany's Commerzbank.

"This resistance is reinforced by 2015's resistance line at $1204...We suspect that the market is pretty much side lined short term."

"Our overall impression," says the daily technical note from bullion market making bank Scotia Mocatta, "is that gold remains weak, with an eventual test of $1163 – the June low."

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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