In Depth

Gold price waits for rates clues from Jackson Hole

Political turmoil in the US has the potential to 'help gold in the short and longer term'

Gold price: what would a 'Grexit' mean for investors

20 April

Increased anxiety over Greece's economy is driving up the gold price after weeks of stagnation.

Many investors buy gold in times of political or economic uncertainty, seeing it as a hedge against other assets in turbulent times.

Last week the gold price moved back above the $1,200-an-ounce mark in response to news that Athens is preparing to declare a debt default by the end of April. This morning at 10am it was up again, trading at $1,204.

In February, Frik Els speculated that a Grexit – a Greek exit from the euro – could send gold above $2,000 an ounce, as investors looked for a safe haven.

While gold is historically positively correlated to the Euro, this correlation tends to break down during periods of 'safe haven' inspired buying," James Steel from HSBC Securities tells The Bullion Desk. "Recent events including Grexit concerns and heightened geopolitical tensions have helped support gold."

A report on Mining.com examines the relationship between the US dollar, trading at near 12-year highs against the euro, and the price of gold. It makes the case that when the Fed starts to raise interest rates it could "mean more upside for gold than the dollar."

Referring to the ongoing crisis in Athens, it adds: "This asymmetry may be especially relevant in the event of a shock such as the break-up of the euro."

According to the Wall Street Journal, Peter Hug, global trading director at Kitco Metals, has already told investors that "this is not the time to cancel your insurance and may be a good time to buy some protection, if you do not have some gold as a diversifier."

"Greece and what happens next continues to dominate Europe, with euro-gold remaining well supported amid mounting uncertainty over the potential and indeed timing of a Grexit and all the capital controls and other measures that would need to be put in place," says ICBC Standard Bank analyst Leon Westgate.

 

Gold price pinned down as US dollar rides high

15 April

The strength of the US dollar prevented the gold price making much of a gain on yesterday's two-week low today, as news of China's slowing economy added to downward pressure on the precious metal.

It dropped to $1,189 during morning trading,  just $5 above yesterday's low, before recovering to £1,195 by 4.30pm BST today.

"Precious metals continue their aimless meandering as the dollar remains the focus," Marex Spectron's David Govett told BullionDesk.com. "A sell-off in the greenback yesterday lifted prices temporarily, but dollar buying has resumed and precious metals are once again back in the doldrums." 

The US dollar continued to make gains today, rising to $1.06 against the euro at 4.30pm.

Chinese economic data also acted as a brake on the gold price this morning, with the country recording annual growth of 7.0 per cent in the first quarter, its slowest pace in six years.

"It is now even more likely the People's Bank of China will need to further cut interest rates to support the economy, but with credit levels very high in the economy, there will be limitations as to how much monetary policy can support the economy," analysts MKS Finance said in a note.

Commerzbank said the data would have an impact on the price of gold. "Market participants clearly believe that the Chinese figures mean lower economic growth and thus more subdued physical demand for gold," the bank said.

In the other metals, silver was one cent lower at $16.17 per ounce, having risen from a near four-week low of $16.10 in yesterday's session.

Platinum held steady at $1,151 per ounce and palladium was unchanged at $761.

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