Gold News

Gold Prices 'Stuck in Dollars' Despite 100% Grexit Risk, Holds 22% Uptrend in Euros as EU's Juncker Demands 'Quick Conclusion' 4 Years On

GOLD PRICES fell again from a rally back to $1200 per ounce in London Tuesday lunchtime, also retreating from 3-session highs against the Euro as Greek banking shares sank with Athens' bond prices on fresh fears of a state default or 'Grexit' from the single currency zone.
 
"Gold remains stuck in a narrow range even as the market balances the cranking up of Greek tensions," says one London bullion bank's commodities team in a note.
 
But with Greece "repetitively in the headlines," adds the trading desk at ICBC Standard Bank today, "Euro gold [is] holding on to its upward trend" – now taking the Euro gold price 22% higher from end-November's lows.
 
Gold priced in Dollars "has had ample opportunity to rally," says another London broker, pointing to China's easier monetary policy and fresh Russian reserves buying.
 
RBC Bank in Canada said overnight it expects further demand from Moscow to help "support the gold price" in 2015 "given the geo-political and Ruble liquidity risks the country is facing." 
 
Against such factors however, "The Dollar and stock market strength remain the main driver in the precious metals markets," says the London broker.
 
"Global risk appetite is still high," agrees consultancy Capital Economics, also trying to explain in a press release why gold "isn't doing better despite 'Grexit' risks...
 
"The markets still appear to be anticipating some sort of last-minute deal...[and] even if Greece does default, it might make it easier for Greece to remain a member of the single currency, by reducing the need for austerity."
 
But weighing most against gold prices, "There is a widespread perception (mistaken, in our view) that Greece is a 'special case' and that other members are very unlikely to follow it out of the door."
 
Speaking to journalists in Vienna today ahead of Friday's Eurogroup meeting of finance ministers, "The intensity of talks [with Athens' left-wing Syriza government] has increased in the past four or five days," said European Commission president Jean-Claude Juncker.
 
"But [it] is not yet at the maturity needed to be able to reach a quick conclusion."
 
Athens first called for talks to discuss bail-out loans 4 years ago last week, two months after the true extent of its debt crisis was revealed.
 
"Greece has a humanitarian crisis," Juncker said today, "so it's out of the question to abandon Greece.
 
"It is also out of the question to support Greece at any price."
 
The market implied probability of Grexit now stands at 100% according to analysts Fathom Consulting – a level seen throughout 2011 and 2012 on its metrics.
 
The markets gave zero probability to a Greek exit from the Eurozone as recently as September.
 
"While options [prices] remain near recent lows" in gold derivatives, says ICBC Standard Bank, "the premium for puts is slowly chipping away" – signalling less demand for the right to sell gold short and so meaning the "market is similarly looking for move higher."
 
Silver meantime tracked gold prices higher and then lower on Tuesday, falling below $16 per ounce for the second day running, a level last seen 5 weeks ago.
 
Silver's biggest ETF product, the iShares Silver Trust (NYSEArca:SLV) yesterday saw its metal backing swell by 0.4% to 10,150 tonnes, the largest level in a month.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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