Gold slips after Greek bailout agreement
London (Feb 22) GOLD prices have fallen as a deal between Greece and its creditors took shape, easing worries about the eurozone and driving investors out of the haven metal.
Gold for April delivery, the most actively traded contract, closed down $US2.70, or 0.2 per cent, at $US1,204.90 a troy ounce on the Comex division of the New York Mercantile Exchange on Friday. Prices had hit $US1,215.30 an ounce earlier in the session, when a deal appeared less certain.
Finance ministers from the 19 eurozone countries agreed a four-month extension for Greece’s bailout in what appeared to be a breakthrough in the standoff between Athens and its creditors. The news deflated some of the uncertainty over whether Greece would quit the eurozone — which weighed on gold, an asset some investors buy in times of political or economic turbulence.
“There is certainly a simmering down of sovereign risk concerns now, and that is putting pressure on gold,” said James Steel, an analyst at HSBC.
Dollar higher after Greek deal
Gold futures are down 7.4 per cent from their January highs, as Greece and the eurozone reached an agreement and expectations the Federal Reserve will raise interest rates in 2015. Gold tends to fare poorly against yield-bearing investments when borrowing costs rise.
The market’s attention will now likely shift back to the Fed, with Chairwoman Janet Yellen scheduled to give monetary policy testimony to Congress next week, said Bart Melek, head of commodities strategy at TD Securities.
Indications that the Fed is in no hurry to raise rates are likely to push gold prices higher, Melek said in a note to clients. He expects prices to reach $US1,229 an ounce by the middle of the month.
“But there will be volatility, with prices moving ... depending on economic data,” he said. Strong US data would force gold prices lower, while weak numbers would have the opposite effect, he said.