Gold News

Gold Prices Hit 2-Week Low as Deflation Hits Germany, Bond Yields Sink, Greece Faces "No Win" on Debt Relief

GOLD PRICES fell near 2-week lows for US and UK investors on Thursday and slid almost 2% against the Euro as Western stock markets recovered earlier losses following news of deflation in German consumer prices.
 
Germany's consumer price index has fallen 0.3% from January last year, the Statistisches Bundesamt in Wiesbaden said, the heaviest reading since the two-decade record of 2009.
 
UK inflation will also turn "slightly negative" said Bank of England governor Mark Carney in a speech overnight.
 
UK government debt yields fell to new all-time lows on Thursday, dipping below 1.4% per year as bond prices rose, while neighboring Ireland raised 6-month loans from the bond market at 0% rates.
 
"Falling government bond yields were supporting gold because the opportunity costs decreased," says precious-metals analyst Peter Fertig of QCR in Hainburg, Germany, writing in the new 2015 forecast survey from trade body the London Bullion Market Association.
 
Fertig was joint runner-up in the 2014 competition for gold price forecasts.
 
"However, once the ECB has implemented QE, profit-taking will probably set in," Fertig now says, forecasting 4% lower gold prices on average in 2015 at $1216 per ounce.
 
Greek bond yields also fell sharply on Thursday, with debt prices rallying as shares in the country's major banks bounced from yesterday's plunge of up to 30%.
 
That knocked almost 2 percentage points off Athens' 10-year yields, taking them back down to 8.2% – the level before last Sunday's election victory for Syriza, which wants to write off some of Greece's €300 billion loans from the "troika" of Eurozone partner states, the European Central Bank, and the International Monetary Fund.
 
"Haircutting IMF loans would inflict losses on many countries far poorer than Greece," writes Reuters BreakingViews columnist Hugo Dixon in a letter to the Financial Times. "If the ECB accepted a haircut on its bonds, it would probably breach EU law."
 
But "haircutting the Eurozone loans won't provide much debt relief in the short term," says Dixon, noting that those loans to Greece don't need any repayment until 2022 and are charged at just 1% annual interest anyway.
 
"If Greece's creditors capitulate," says ex-UBS and now independent economist George Magnus in the UK's Prospect magazine, " the floodgates will open for similar treatment elsewhere, causing huge anguish and discomfort in northern Europe.
 
"[But] if Greece backs down in the face of stern creditor resistance, the feeling of mistrust between north and south will become more corrosive and politically explosive."
 
"Increasing geopolitical tensions, subdued growth, uncertainties in the Eurozone and possible greater stimulus will prevail in 2015," says 2014 LBMA gold price forecast winner Frederic Panizzutti, head of Swiss refiner MKS Pamp's Dubai operations.
 
Also writing in the new 2015 survey, and a four-times winner across gold, silver, platinum and palladium forecasts, Panizutti now predicts a 2.1% rise in gold's Dollar average to $1292 this year.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals