Gold price falls below $1,200 to 7-wk low, Greece nears deal

Otmane El Rhazi from The Bullion Desk.

Gold fell back below the key psychological level of $1,200 on Monday morning, pressured lower by Greece edging closer to a deal with its creditors on its bailout.

The spot gold price at $1,193.00/1,193.80 per ounce was down $8 on the pre-weekend close – it hit its lowest in seven weeks at $1,190.90 earlier this morning and traded no higher than $1,205.

“It seems that Monday will be a critical day for the markets and we could see gold trade in a much wider range than what has been the case for the past few days,” INTL FCStone’s Ed Meir said.

Greece has reached a deal in principle with its creditors to extend the country’s 240-billion-euro bailout although it must present a list of reforms to its lenders to secure the four-month extension, making a messy departure from the eurozone – the so-called ‘Grexit’ – less likely.

Still, any suggestion that the reforms will be rejected could see the deal collapse and reignite safe-haven appeal for gold.

“Difficult as it is to predict at this point, we suspect that the Greek proposals will ultimately get a European sign-off on Monday, in which case we could see further price erosion in gold later in the week,” Meir added.

Also weighing on prices is a stronger dollar at 1.1319 against the euro, up around 0.6 percent.

While the return of the Chinese market from later this week after the Lunar New Year holiday may provide a fillip to prices, Precious Metals Insight’s Phillip Klapwijk noted last week that buying is likely to be subdued.

Wholesalers already are well stocked and reordering after the holiday is seasonally weaker because retailers carry little stock compared to their sales volume due to very rapid turnover of their inventory.

“The Chinese return from their New Year’s holiday later this week and with levels around the $1,200 area, we may well see some physical demand. However the market seems quite happy to sell any rallies and I don’t see prices moving up substantially for a while to come,” Marex Spectron’s David Govett said.

In a quiet day for data, the German IFO business climate at 106.8 fell short of consensus at 107.4. US existing home sales are due later

Other metals were steadier – silver was last down five cents at $16.14/16.19 per ounce, while platinum was unchanged at $1,156.00/1,161.00 but still at its lowest in five-and-a-half years and palladium was $1 lower at $774/779.

(Editing by Mark Shaw)

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