In the wee hours of this morning, Bloomberg reported that gold could climb because policymakers in Europe were holding back a Greek aid package. European finance ministers requested that Greek policy makers pass austerity measures before they released their $173 billion rescue package.
At 3:04 PM in Singapore, the spot price had changed little, resting at $1,730.93 per ounce. After the metal gained 0.3 percent earlier, it was poised for a weekly advance.
Bloomberg data also revealed that gold in exchange-traded products was just 0.2 percent under the December 13 record.
Everbright Futures Co. research head Ye Yanwu commented to Bloomberg that investors seeking a safety net were continuing to supplement their portfolios with gold. He expected more buyers to enter when the price fell. He also noted that general market sentiment will be driven by the problems in Europe, which will get better and worse.
Fitch Ratings reported that without the bailout, the country could default. Evangelos Venizelos likened the upcoming parliamentary vote to a ballot regarding euro membership. So far this year, gold has rallied an impressive 11 percent, while the dollar fell 1.8 percent against a basket of six currencies including the euro.
On the New York Comex, bullion for April delivery declined by 0.5 percent and the initial margin on futures was lowered by CME Group Inc. The new margin of $10,125 per contract will take effect on February 13 after close of business.
Despite this, the largest gold miner in Australia, Newcrest Mining Ltd., predicts “strong” prices for the precious metal. For the next two to three years, it expects the metal to trade between $1,500 and $2,500 per ounce.
Newcrest itself is in a great position, reporting record profit for the six months ending December 31, according to company CEO Greg Robinson.
That was the situation very early this morning but by 5 AM, things had changed. The Standard & Poors GCSI 24-commodity gauge dropped 0.5 percent at 6:05 PM in Singapore. Gold for immediate delivery declined to $1,720.13 per ounce, a 0.5 percent drop, by 9:09 AM London time. The price is down 0.4 percent of the week.
On the New York Comex, the metal for April delivery declined 1.1 percent to $1,722.10. Silver followed suit, with silver for immediate delivery dropping 0.7 percent. However, silver is still the best-performer of all precious metals this year.
Everything seems to be up in arms due to Greece. Just one day ago, the euro climbed after political leaders in Greece announced they had come to an agreement regarding the bailout austerity measures. It reached a two-month high against the yen and the dollar following announcement by European Central Bank President Mario Draghi that collateral requirements for the upcoming three-year loan auction would be lowered.
By 5 PM New York time on February 9, the euro climbed 0.2 percent to reach $1.3286. After it reached 103.29 yen, it rested at 103.19 yen. The yen declined 0.8 percent against the dollar, settling at 77.67 per dollar. Central banks are holding their breath to see what happens following the latest announcement regarding the Greek bailout.
Though the discussions regarding Greece successfully concluded, the responsibility rests on the Greek government to prove that the second bailout will work. Legislative and other actions will be necessary to convince European partners that this go-round will have a different outcome.
GFT Forex Director of Currency Research Kathy Lien told Bloomberg that investors are hesitant to aggressively purchase euros prior to the Greek parliamentary vote and several other intermediary events. By expanding collateral, the European Central Bank is acquiring riskier assets, which Ms. Lien said is definitely not a positive thing.
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