Gold News

Gold Price Falls as Eurogroup Meets on Greece, Russia Meets Germany on Ukraine, ECB QE Seen Cutting 'Safe Haven' Flows

GOLD PRICES fell hard, hitting four-week lows Wednesday lunchtime in London, as stock markets recovered earlier losses ahead of a key Eurozone meeting over the Greek debt crisis.
 
Priced in US Dollars, gold dropped to $1224 per ounce – more than 6% below late-January's five-month high.
 
Euro gold prices meantime fell to touch last Friday's 3-week low at €1084, dropping almost half of 2015's earlier 19% rise.
 
With fighting and the death-toll in eastern Ukraine worsening, the heads of state of Russia, Ukraine, Germany and France were due to meet later in Minsk, Belarus.
 
Eurogroup finance minister meantime meetin Brussels to discuss the new Greek government's demand to renegotiate its 2010-2013 bail-outs.
 
"Our goal is clear," tweeted Greek prime minister Tsipras this morning. "To put the needs of our people above all else."
 
His other messages, however, stressed European "solidarity", with Tspiras saying that Greece's plan "respects the European institutional framework [and aims to] boost growth & cooperation in the EU."
 
Contrary to what Greek finance minister Varoufakis has claimed, the risk of "contagion" to other weaker Euro states is very low, the S&P ratings agency is quoted by German newspaper Boersen-Zeitung.
 
"Is our €65 billion almost gone?" asks the front-page of German tabloid Bild today.
 
"Germany can take a tough stance," says Daniel Gros, director of the Center for European Policy Studies in Brussels and a former advisor to the IMF, France's finance minister, and both the European Commission and Parliament, "without fearing...financial-market turbulence" because of the European Central Bank's QE announced last month.
 
"Greece is the only [bailed-out Euro member] that has consistently dragged its feet on reforms and sustained abysmal export performance.
 
"By financing continued deficits...the troika actually enabled Greece to delay austerity."
 
"The gold price," says the latest monthly bullion analysis from Germany's Commerzbank, "is likely to continue profiting from the ultra-loose monetary policy pursued by the ECB."
 
Surging Greek bond yields, it adds, plus "increased withdrawals from Greek bank accounts...can [also help] explain the strength of the gold price in Euros."
 
Eurozone QE, counters David Jollie at trading house Mitsui Global Precious Metals, "is less likely to have a meaningful medium term impact on metal prices than US easing did."
 
Whilst ECB money creation "should weaken the Euro in the longer term," Jollie says, "it could also make the Euro’s survival more likely, reducing the safe haven bid for gold."
 
On the other hand, "Falling bond yields are likely to decrease the opportunity cost of holding precious metals," and some of the "additional liquidity" created by the ECB will likely go into gold.
 
German and other AAA-rated Eurozone bond prices ticked higher before the Eurogroup meeting on Wednesday, pushing short-dated yields further below zero for investors buying today.

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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