GOLD PRICES held tight in London on Friday around $1180 per ounce – the crash low reached in mid-2013 – as Western equities fell and major government bond yields rose again following yesterday’s walk-out of Greek debt talks by the IMF lender.
The Dollar slipped versus the Euro, capping gold prices for Greek and German investors alike just below last Friday’s finish at €1054 per ounce – some 1.4% above Monday’s dip to 5-month lows.
Athens’ stock market lost more than 5% for the day, erasing the week’s earlier bounce.
A new poll for German TV station ZDF today said only 41% of voters actively want Greece to stay in the Eurozone, with 70% saying Athens’ creditors should make no more ‘concessions’.
A survey in Greece meantime showed “radical left” party Syriza, currently leading Greece’s government, beating its nearest rival by 14 percentage points in an opinion poll.
“We believe that the uncertainty over what will happen to Greece should ultimately result in a higher gold price after all,” says a note from commodity analysts at Germany’s Commerzbank.
But with US consumer confidence rising sharply to beat analyst forecasts on the Reuters/Michigan survey today, “Gold and silver have tended to struggle in a rising US real interest-rate and US Dollar environment,” said analysts at former London bullion benchmark participant Deutsche Bank.
“We would view an equity market correction and/or a slowdown in the pace of the US expansion as offering the best lifelines to gold.”
Crude oil today retreated from this week’s rally near 1-month highs, while sugar prices hit new 6.5-year lows.
Copper stayed near its lowest price since mid-March, but held 10% higher from the New Year’s half-decade lows.
“The closer we get to this expected US interest rate hike,” Reuters quotes French investment and bullion bank Natixis’ analyst Bernard Dahdah, “the lower the price of gold will get.”
The Federal Reserve meets next Tuesday and Wednesday to set policy – the long-awaited June meeting at which several Fed members had previously said they expected to raise rates from 0%.
“We still have space for more losses [in gold prices] until September,” says Dahdah, “when the first rate hike should happen.”
“The Fed will almost certainly leave monetary policy on hold,” reckon analysts from London-based consultancy Capital Economics, but “markets will watch the statement and subsequent press conference closely for any hints on the timing of the first rate hike.”
Meantime for gold prices, “The growing likelihood of a Greek default may also weigh on sentiment generally,” they add, “though we expect it to provide further safe-haven support for gold.”
