Gold made significant losses early on Monday after the far-left Syriza party won Sunday’s general election in Greece, sending the euro to 11-year lows and bringing fears of a possible break-up of the bloc to the fore.
The spot gold price at $1,282/20/1,283.00 was down $11.20 on Friday’s close, trading within an intraday range of $19.
Syriza, which is on track to win 149 seats – just two short of an absolute majority – has formed an anti-austerity coalition with the right-wing Greek Independents party, which is set to have 13 seats.
Syriza leader Alexis Tsipras has vowed to renegotiate Greece’s 240-billion-euro bailout – this could lead to the country defaulting on its debt, and, ultimately, exiting the eurozone. The euro dived to 1.1098 on the news before settling around 1.1251.
“There will no doubt be more moves in the embattled currency. This in turn should move gold around to a degree… the longer-term picture is unclear at the moment, so look for day trade opportunities as and when they present themselves,” Marex Spectron’s David Govett said.
The resulting environment should create a more bullish stance for gold, with the metal’s appeal as a safe-haven asset increased by volatile markets and the prospect of another eurozone crisis. The move should also put pressure on the US Federal Reserve to delay any increase to interest rates.
“Gold has lost upside momentum on a stronger dollar due to increased contagion risk in the eurozone following Syriza’s victory,” FastMarkets analyst Tom Moore said.
“We would expect the Fed to exercise caution over its rate decision this week – a move toward raising rates would boost dollar strength, further reducing the US’ global competiveness, providing gold with renewed upside pressure,” he added.
Further declines in oil prices are also threatening to offset inflation projections, with Brent crude falling to $47.84 per barrel and WTI below $45. In Saudi Arabia, King Salman bin Abdulaziz pledged to maintain the policies of predecessor King Abdullah, keeping oil production in the world’s largest producer unchanged.
Amid a quiet day for economic announcements, the German IFO business climate at 106.7 was in line with expectations.
Instead investors will now look to Wednesday’s US Federal funds rate and the corresponding statement, while Friday sees the first of three announcements on US GDP growth.
“Whilst, I don’t suspect for a minute that the Fed will surprise us with an early rate rise, that would really set the cat amongst the pigeons,” Govett added. “The markets will, as always, be on tenterhooks waiting for any sign of wording change to the current en vogue watchword, ‘patience’.”
In other metals, silver was last down 26 cents at $17.98/18.03 per ounce and below a session high of $18.48, while platinum at $1,252/1,257 was down $7 and palladium was unchanged at $766/772.
(Editing by Mark Shaw)
The post Gold price makes U-turn as Greece opts for anti-austerity appeared first on The Bullion Desk.
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