GOLD PRICES briefly recovered an earlier 0.8% drop to new 6-week lows lunchtime Monday in London, but then lost the $1200 mark once again as financial pundits awaited a fresh list of reform promises from Athens to its Eurozone and IMF lenders following last week's extension of Greece's current bail-out loans.

 

With China's financial markets still closed for the Chinese New Year holidays, US equity futures pointed lower as European stock markets reversed their opening gains, and the Euro currency bounced back above $1.13 on the FX market.

 

Commodiy indices lost 1% as US crude oil contracts sank below $49 per barrel, but silver beat gold prices to trade nearly 1% up on the day at $16.40 per ounce.

 

"With [gold price] levels around the $1200 area," says broker Marex Spectron in a note, "we may well see some physical demand" once Chinese wholesalers return on Wednesday when the Shanghai Gold Exchange re-opens after the Lunar New Year holiday.

 

"However," Marex adds, "the [investment] market seems quite happy to sell any rallies and I don’t see prices moving up substantially for a while to come."

 

New data from US regulator the CFTC show large speculators in Comex gold futures and options last week cut their net bullish betting on gold at the fastest pace since November's new 5-year low in Dollar prices – a "whopping" drop according to Ed Meir at US brokers INTL FCStone.

 

In contrast, the quantity of physical bullion needed to back shares in the giant SPDR Gold Trust (NYSEArca:GLD) rose, adding 1.5 tonnes to 771 tonnes – almost 10% greater than the 7-year low hit at New Year.

 

"Gold is the precious metal with the most seasonal distribution of demand," says David Jollie at Mitsui Global Precious Metals, pointing to the "key dates in China and India" of the Lunar New Year and then Diwali in autumn.

 

With India's BJP government continuing to roll back the previous administrations anti-gold import rules, "Jewellers are now pitching for a reduction in import duty from 10% to 2%," reports the Hindu Business Line, quoting senior industry figures at a conference in Mumbai last week.

 

But while any such change in the February 28th budget "may improve physical flows via official channels," says Mitsubishi analyst Jonathan Butler, "this is likely to simply be a re-routing of smuggled gold."