Gold price falls temporarily on news flow
Investors remain generally bullish on gold
On Monday, gold prices fell in early Asian trading as investors took profits from Friday’s safe-haven buying. The news that a pro-bailout New Democracy party won elections in Greece calmed market players’ concerns over the country’s future in the euro zone.
Gold fell for the first time in seven sessions as the metal’s safe-haven appeal was dented by the news.
Spot gold was trading at $1,622.10 a troy ounce, down 0.3% from its previous settlement, but off an earlier low of $1,607.15. Increased appetite for riskier assets pushes money out of gold. At present, bullion is more than $200 below a record of around $1,920 struck in September last year.
However, losses are expected to be limited, as the optimism stemming from the Greek news and the rally in risky assets is likely to be short-lived. Borrowing costs in Spain and Italy continues to be high. The Europe’s debt crisis remains a treat to the global economy.
Traders attributed Monday’s losses to profit-taking following a safe-haven buying on Friday that pushed the metal as high as $1,633.85.
With indications that gold is benefiting from safe-haven demand after months of trading in line with risk assets, its downside seems limited. Gold prices could dip back towards $1,600, but the broader crisis in the region persists, which should underpin investor appetite for hard assets.
A softer U.S. dollar was also supportive, as dollar-priced commodities become cheaper to investors holding other assets when the greenback weakens. The euro traded at $1.2685 compared with $1.2640 late in New York Friday. The euro jumped to a one-month high against the dollar after the Greek poll results, but light volumes indicated dealers were still cautious on how the result would pan out. Gold which often tracks movements in the euro ignored gains in the single currency, but data from the Commodity Futures Trading Commission (CFTC) indicated investors were still generally bullish on gold.
This week, gold is expected to take direction from a G-20 meeting starting Monday and a U.S. Federal Reserve meeting June 19-20. Any indication for launch of further easing in the world’s largest economy will likely trigger a rally. Gold prices could be the main beneficiary due to the resulting weakness in the U.S. dollar and demand for the yellow metal as a safe store of value.
Platinum was trading at $1,496.50, up 1.1% from its previous settlement. Palladium gained amid stronger risk appetite, rising 1.4% to $634. Silver slipped 0.6% to trade at $28.57.