Gold price reverses earlier gains as Greek concerns fade

Otmane El Rhazi from The Bullion Desk.

The gold price reversed earlier gains in afternoon London trading, as safe-haven demand on the back of concerns over the Greek government’s bailout programme relaxed.

Spot gold was last seen at $1,259.60/1,260.40 per ounce, down $14.40 for the session after touching lows of $1,255.40 as London handed over to New York.

“Gold is consolidating with the metal reacting to the Reserve Bank of Australia’s decision to cut interest rates this morning, and a surge in the euro, aided by a 10.5 percent increase in the Greek equity market and it seems a relaxation of some of the fears over Greece’s stewardship under its new leader,” Standard Bank’s Leon Westgate said.

“Euro-gold remains worth watching however, with any sell-off there perhaps the trigger for a broader based liquidation,” he added.

Silver has also retreated from session highs at $17.75 per ounce and was last seen at the lower end of the day’s range at $17.17/17.22, unchanged for the day.

The drop in prices comes as investors concerns over Greece’s bailout programme appear to have relaxed on news that new finance minister Yanis Varoufakis has proposed a debt swap.

Varoufakis has proposed that Greece swaps its outstanding government debt with international creditors for growth-linked or perpetual bonds.

The proposal has seen demand for safe-haven assets, such as gold, appear less attractive and has added to the downward momentum on the metal.

“There has been some relaxation in concerns over Greece, though the more positive news-flow about a deal seems not to have lasted very long,” a trader said.

“Speculators are pretty long in gold at the moment, so price moves are likely to be more volatile,” he added.

Earlier, momentum had been building following news that the Reserve Bank of Australia cut rates to a record low of 2.25 percent, citing weak economic growth and higher unemployment than was previously anticipated.

The news represents the bank’s first cut to interest rates since August 2013 and has been designed to stimulate business activity in the face of slowing growth and low commodity prices.

Gradual increases in oil prices are also propping up sentiment in commodities, on continued speculation that output cuts may be on the horizon.

The rumours come following the release of US data that showed demand for leasing oil rigs is slowing, which investors believe suggests that producers might be preparing to cut output.

The dollar has also taken a step back in afternoon trading, at one point at its lowest since January 22nd at 1.1492, though it has since settled at 1.1473.

Poor factory orders data at -3.4 percent against a forecasted -1.8 percent has been attributed to the losses, although total vehicle sales data is still to come at an expected 17 million cars.

Earlier, Spanish unemployment was better than expected at 78,000. However, the Italian preliminary CPI for January fell 0.4 percent and the December PPI dropped 1.0 percent, both worse-than-forecast.

In others, platinum also stepped back from session highs of $1,241.50 and was last seen unchanged at $1,225/1,230 per ounce while palladium was up $1 at $783/788 per ounce.

(Editing by Martin Hayes)

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