Gold, silver drop before China begins holiday

London (Feb 17)  Gold and silver fell on speculation Chinese demand will decline before the nation begins the weeklong Lunar New Year holiday.

Mainland markets are to shut from Wednesday and volumes for the Shanghai Gold Exchange’s benchmark spot contract dropped about 75 percent from Monday’s level to the lowest in more than a year, data from the bourse show. The country is the second- biggest bullion buyer, after India.

The metal rose 3.2 percent in 2015, after dropping the previous two years as an improving U.S. economy backed the case for higher interest rates. The Federal Reserve will release minutes of its January meeting on Wednesday. Greece and its creditors will try to find common ground at meetings in Brussels Tuesday after talks ended Monday, when a euro-area proposal that the nation extend its existing bailout was rejected.

“The market is anticipating that the Chinese buyer will not be there over the coming days to support prices,” Bernard Sin, a trader at MKS (Switzerland) SA, a Geneva-based refiner, said by phone. “The downside is vulnerable, while potential upside risk from the Greek situation has already been priced in.”

Gold for immediate delivery lost as much as 1 percent to $1,220.46 an ounce and was at $1,222.44 by 10:19 a.m. in London, according to Bloomberg generic pricing. Silver dropped as much as 2.7 percent, the most in more than a week, and was last down 2.3 percent at $16.8848.

Gold for April delivery slipped 0.4 percent to $1,221.80 on the Comex in New York. Floor trading was closed on Monday for the U.S. Presidents’ Day holiday and transactions will be booked Tuesday for settlement purposes.

Without a deal, the Greek government of Alexis Tsipras could run out of money by the end of March and be forced to choose between breaking election promises or sticking with the euro. Commerzbank AG raised the risk of the country exiting the euro to 50 percent.

In London, platinum dropped 1 percent to $1,197 an ounce and palladium declined 0.8 percent to $782.78 an ounce.

Source: Mineweb