Gold Prices Erase Dollar Spike as Bonds Sink with Stocks, Greece Uses Emergency Funds to Repay IMF
Tuesday, 5/12/2015 16:15
GOLD PRICES erased an earlier pop to 3-session highs at $1196 per ounce Tuesday afternoon in London, retreating against the Dollar as the US currency rallied but a sell-off in major government bonds and Western stock markets worsened.
Eurozone bonds fell across the board, with Germany Bund yields rising to new 6-month highs near 0.7% on 10-year debt, taking the capital loss since April 20th to more than 6%.
Greek 10-year yields jumped 0.13 percentage points to 10.7% after Athens repaid €750 million on schedule to bail-out lender the International Monetary Fund, but only by emptying its own bank account with the IMF, held at the Bank of Greece.
New York shares opened lower, and Germany's Dax index lost over 2% for the say, extending its drop of the last 4 weeks to more than 7%.
Broad commodity indices rose 0.8% for the day, however. Silver tracked gold prices, first slipping and then spiking against the Dollar, before trimming that gain to trade below last week's finish at $16.46 per ounce.
"After an exceptionally dull start, the precious metals burst into life," says a note from ICBC Standard Bank's commodities team in London.
"It isn't clear what triggered the move, with the Dollar weakening throughout the course of the morning."
The gold prices "is still squarely in the middle of its recent range," says another London broker, noting last week's peak near $1200 and the low just beneath $1180 per ounce.
"The continued rise in bond yields," predicts Germany's Commerzbank analysts, "could put further pressure on gold prices, because it increases the opportunity costs of holding gold as gold does not yield any interest itself."
"The Greek issue has not prompted any safe-haven bids," a Far East trader told Reuters overnight.
"Even disappointing data last week from the United States failed to push gold prices higher, showing lots of caution among bullion investors."
Back in Europe, Germany's finance minister Wolfgang Schäuble – who yesterday signalled Berlin is willing to see Greece quit the Euro, saying "the Greek people should decide" by referendum – today said he supports the UK's newly re-elected Conservative government in wanting to reform elements of the European Union.
"We agreed – we spoke about this," said Schäuble of his British counterpart George Osborne after a meeting of European finance ministers in Brussels, citing the Conservatives' stated aims of cutting bureaucracy and "limit[ing] abuse of the basic freedoms in EU treaties."
Euro gold prices today whipped between €1050 and €1060 per ounce – a 15-month high when first hit in January.
UK investors, in contrast, saw the gold price in Sterling sink to new 2015 lows beneath £755 per ounce as the Pound jumped on the FX market following stronger-than-expected manufacturing data.
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