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Gold Price Drops Near 6-Week Low, Defies Analysts as Ukraine Ceasefire Fails with Greek Bail-Out Talks

Tuesday, February 17, 2015 7:46

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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD PRICES fell hard Tuesday lunchtime in London, dropping near 6-week lows at $1213 per ounce as the Euro currency rose after the breakdown of Greek bail-out talks, and reports spread that the ceasefire in eastern Ukraine has failed to hold, with pro-Russian separatists seizing the town of Debaltseve.

Silver fell harder again, extending its slide to 5% from Friday’s finish as it traded below $16.40 per ounce.

With the return of US traders after the President’s Day holiday, the gold market lost wholesale Chinese demand Tuesday, with trading volume in Shanghai’s key contract near multi-year lows as the world’s No.2 consumer nation prepares for the Lunar New Year holidays starting Thursday.

New data meantime showed UK inflation on the Consumer Price Index falling to what the BBC calls “a record low” of 0.3% per year in January.

But with fuel & food items stripped out, noted former Bank of England member Andrew Sentance, core inflation remains above its pre-financial crisis average.

Brent crude oil today crept higher above $62 per barrel, gaining some 25% from last month’s new 5-year lows.

“There looks to be some weakness in the precious metals,” says one Asian trading desk, “with no real demand stemming from news of the Greek discussions or from reports of

fresh violence out of Ukraine.”

“The impasse over Greece/Eurozone ministers discussion on ‘bailout terms’,” reckons a note from Germany’s Commerzbank, should “be a supportive story for gold in the short run.

“[But] evidently, the overwhelming majority of market participants still anticipate a last-minute solution to the Greek debt dispute.”

“The US holiday yesterday and a lack of Chinese interest,” says Leon Westgate at Standard Bank in London, “probably helped keep the gold price in check, even with a ratcheting up in tensions in Ukraine.

“The breakdown in talks between Greece and the EU has had a surprisingly limited impact on gold prices.”

One week today, Athens is due to pay almost €600m in debt interest and maturing bonds, with a further €6 billion falling due over the following month according to a note from Deutsche Bank.

Next week’s Indian government budget also means wholesale demand from the No.1 consumer nation is weak, says Standard Bank’s trading desk. Because dealers expecting a widely-discussed cut to the country’s 10% import duty do not want to be caught with stockpiles carrying the higher tariff.

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: https://www.bullionvault.com/gold-news/gold-price-021720151

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