Gold dips as stronger dollar offsets eurozone concerns
London (Feb 10) Gold dipped on Tuesday as dollar strength offset the supportive effect of concerns over Greece’s future in the eurozone and fears over escalating conflict in Ukraine, which hurt risk appetite and weighed on stock markets.
A 0.4% rise in the US unit against a currency basket led the metal to stall after the previous day’s rise, preventing a steeper recovery from Friday’s three-week low.
Spot gold was down 0.1% at $1,237.40 an ounce at 10.33am GMT, while US gold futures for April delivery were down $4.10/oz at $1,237.40.
Prices slid to $1,228.25 on Friday after upbeat US jobs data fuelled expectations that the US Federal Reserve will raise interest rates this year, overriding concerns over the health of the eurozone, which lifted prices 8% last month.
Those concerns are now reasserting themselves, with nervousness over Greece potentially withdrawing from the euro and escalating conflict in Ukraine weighing on global markets on Tuesday.
"We’re expecting a rebound, partly because of what does seem to be a gathering storm around Greece and Europe," Capital Economics analyst Caroline Bain said.
"There is a lot of uncertainty surrounding the eurozone, which we think will be supportive of gold prices this quarter."
The probability of Greece leaving the eurozone has risen several notches as Prime Minister Alexis Tsipras has taken an increasingly hard line over government debt. Mr Tsipras has insisted that his country would not extend its reform-linked bailout.
European Commission president Jean-Claude Juncker warned Greece not to expect the eurozone to bow to Mr Tsipras’s demands in a growing confrontation that has rattled financial markets and prompted US and Canadian pleas for calm and compromise.
Those concerns were offset by strength in the dollar, however, in which gold is priced.
On the main physical markets for gold, premiums over spot prices on the Shanghai Gold Exchange contracted slightly, MKS said in a note on Tuesday, but remained between $2.50-$3.50, showing demand has emerged at lower levels.
"The worry will be, when the Chinese go on holiday next week and the natural support is taken away, will gold fall further? Time will tell," it said.
Some Asian markets close next week for the Lunar New Year holiday.
Among other precious metals, silver was down 1.1% at $16.84/oz. Platinum was down 0.1% at $1,215.70/oz, while palladium was down 0.2% at $775.50/oz.