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Gold Prices 'Side-Lined' Before Fed as Greece Threatens 'The Big No', Money Managers Choose Derivatives for Protection

Wednesday, June 17, 2015 10:13

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

GOLD PRICES slipped $5 per ounce ahead of Wednesday’s Federal Reserve statement on US interest-rate policy in very quiet trade, while Western stock markets ticked lower and Greek bond prices rallied despite the odds of a resolution to Athens’ debt crisis worsening.

Nearing Monday’s 1-week lows at $1173, Dollar gold prices have now traded within 4% of $1180 per ounce for more than 4 months.

Without a new deal, “We will accept the responsibility of saying ‘the big no’ to a continuation of these catastrophic policies,” said Greek prime minister Tsipras in Athens, shortly before meeting Austrian chancellor Faymann – who had earlier expressed sympathy for Greece, saying that some of the lending nations’ demands “[aren't] in order”.

“High joblessness at 30-40%, no health insurance, and then raising VAT on medicines…People in this difficult situation cannot understand that,” said Faymann.

New UK data today meantime put annualized wage growth at the fastest pace since late 2011, while unemployment held steady at 5.5% last month.

A jump in Sterling on the FX market sent gold priced in Pounds down through £750 per ounce to new 8-month lows.

Dollar gold prices have “found support from safe-haven buying,” reckons a note from Canadian-based market maker Scotia Mocatta, “on concerns that the Greek debt saga could potentially end in Greece exiting the Eurozone.”

But “despite the protestations of others,” writes London brokerage Marex Spectron’s David Govett, “Greece remains an irrelevance” to bullion trading right now.

“The gold market has stalled,” agrees a technical analysis from Commerzbank in Germany, “and is pretty much side lined short term.”

Holdings in the major gold-backed ETF trust funds ended Tuesday unchanged, and trading volumes across world bullion markets and proxy investments were again muted today.

A day after London bullion market member Bank of China joined global benchmark the LBMA Gold Price as a direct participant, Shanghai’s major domestic gold contract saw its heaviest trade in a week, but it remained 25% below the last 6 months’ average as Yuan prices slipped lower.

German insurance giant Allianz’s economist Mohamed El-Erian yesterday put the odds of a Greek “accident” at 55%.

A Greek negotiator today told the Reuters newswire that Athens cannot repay the €1.6 billion due to the International Monetary Fund on 30th June without a new extension of bail-out money.

Professional money managers have sold stocks and raised cash holdings from 4.5% to 4.9% of portfolios, says the latest Bank of America-Merrill Lynch survey, fearing both a hike in US interest rates and a likely Greek default – with or without exiting the Euro.

The same survey says a record proportion of fund managers have also bought derivatives contracts to hedge against a sharp drop in stock markets – greater even than late-2008 on BAML’s records.

Almost 7 in 10 believe China’s equity markets are now a bubble.

Today the Shanghai stock market rose 1.6%, rallying from Tuesday’s drop to approach new 7.5-year highs, some 60% above New Year 2015 levels.

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-prices-061720154

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