Gold Dips Below $1,170 Despite Greek Debt Crisis

Gold Price below $1,170 – On-going Greek Crisis

Price of gold fell recently as the markets anticipated news from euro zone summit speculating whether progress would be made due to the Greek debt crisis, as growing positions in gold underline bearish sentiments towards the precious metal.

In the meantime, China’s foremost stock market closed at 7.4% down the same day and some 18% down from fortnight back since several brokerage houses had tightened their margin trading rules. A data portrayed French and Italian consumer confidence rising though private sector loans from the 19 nation Eurozone increased by only 0.5% annually in May, as stated by the European Central Bank, inspite of 5% growth in the currency union’s broad money supply motivated by the new QE bond buying program of ECB.

 Gold has failed so far to see substantial safe-havenbids due to the on-going Greek crisis and the strength in the dollar has also stopped improvements. Higher prices attempts seem pointless with traders selling into rallies and bringing the prices quickly lower. Spot gold eased 0.1% to $1,168 an ounce by 0630 GMT and the metal increased as much as 0.6% early on Monday followed by Greek rejection on terms of the bailout package.

Investors Concerned – Major Macro Risks

However, it gave up most gains close to 0.2%. On Tuesday, US gold futures dropped to 0.5 percent. The price move indicated the growing evidence that gold cannot hold its weight against the face of market jitters according to an analyst at Phillip Futures, Howie Lee.

He commented that `while that suggest gold has lost some appeal as a safe-haven asset, more importantly it signifies the loss of interest in gold as an investment vehicle. Investor positioning reflected the same, established on US Commodity Futures Trading Commission data on Monday. In the week ending June 30, hedge funds as well as money manager increased their short position to the highest on record.

Non-commercial dealers increased their short positions to a two-year high. While, investors were still net long on gold, a week ago, bullish position fell drastically.However, in terms of transaction, 3 days of strong revenue in the Shanghai Gold Exchange’s domestic kilobar, contract trailed on Friday, by record high volume, with its premium doubling from the previous day to $2.60 per ounce over comparable London quotes.

A London bullion bank had commented that `more people getting involved is a clear sign that investors are concerned about major macro risks – Greece, Europe, China’, adding that the exchange trade trust fund vehicles backed by gold, saw strong inflows on Thursday.

Athens Speculating Proposal for a Deal

The benefit of gold had also been affected by prospects of higher US interest rates later this year which would have increased the demand for the dollar and reduce the appeal of non-interest paying bullion. The weakness in the euro, recently from the Greek crisis has supported the dollar.

Dollar index trading near a one month high was reached on Monday and according to a Sydney based bullion trader, focus was on the euro zone meeting to take place with any Greek debt deal is likely to send gold prices below $1,150.Athens is speculating in bringing a proposal for a deal to the summit after Germany and France informed Greece on Monday, to come up with thoughtful proposals for the purpose of restarting financial aid talks.

Edward Meir, an INTL FCStone analyst stated that `any movement towards an agreement would probably mean that gold’s staying power at current levels will prove to be short-lived’.

Stock Market Rebound Lowers Gold Prices

Gold Prices Lower

The bounce in the stock markets all over the world at the starting of the trading week has pressurized the U.S trading early on Monday, as reflected in the moderately lower gold prices. A bearish outside market phenomenon, which is working against these precious metals, is also the reason for the higher index of the U.S dollar on this day. At $1,210.00 an ounce, February Comet Gold was last down $12.50. At $1,210.25 an ounce, Spot Gold was last down $12.20. At $16.84 an ounce, March Comet Silver was last down $0.227.

Crude Oil’s Status

Due to last week’s selling pressure, the World Stock market prices were comparatively higher on Monday for corrective bounces. The past few weeks have seen plunging price of crude oil. This has frightened the stock markets, while the consumer at gasoline pumps have benefited.

The January Nymex crude posted a corrective bounce after falling to a five-year low of $56.25 overnight. Libya, a major oil-exporter, is limiting selling interest in oil, due to some fresh violence within the country, at the starting of the trading week.

Incidents over the World Affecting the Market

Not hovering much below its recent four-year high, The U.S dollar index was firmer on Monday. For the past few months, the bearish underlying factor for the sector of raw commodity has been the stronger greenback.

The Prime Minister of Japan, Shinzo Abe, after his much expected and anticipated election victory on Sunday commented that he will continue in his endeavor to boost the Japanese economy, which is presently moribund.The terrorist situation in Sydney, Australia where a gunman is retaining hostages at a café is also being kept watched by the markets, in suspicion of terrorist links.

The FOMC Meeting

A meeting of Federal Reserve Open Market Committee (FOMC) that is to be held this week for discussing the monetary policy of the U.S is being anticipated by the traders and investors. Many believe that the monetary policy hawks will be favored as the Fed meeting is expected to change the statement wording slightly.

A timeline to raise interest rates might also be further elaborated by the FOMCin the meeting, as the interest rates hasn’t been increased by the Fed in six years. U.S. economic data that is to be released on Monday includes the Empire State manufacturing survey, NAHB housing market index, industrial production and capacity utilization and Treasury international capital data.

In the Near Future 

Technically, in order to lower chart consolidation after recent gains, the gold futures of February have seen sideways. The overall near-term technical advantage is still in possession of the bears. A closing above solid technical resistance during the December high of $1,239.00 is the next year-term upside price breakout objective of the gold bulls.

A closing of prices below solid technical support of $1,184.80 is the next downside near-term price breakout objective for the Bears. The first resistance is observed at $1,221.00 and then again at the overnight high of $1,225.00, while the first support is generally observed at the overnight low of $1,207.00 and then finally at $1,200.00.

After Gold Bubble Burst!

The soaring price of gold in recent years in early 2009 it was $800 and it reached more than 1900 dollars an ounce in fall 2011 - had all the characteristics of a bubble. And now, like any soaring prices of disconnected assets fundamentals of supply and demand, this gold bubble deflates. At the height of the outbreak, mad gold - a paranoid mixture of investors and others whose political agenda is determined by fear - happily predicted the price of gold on the order of 2000, 3000 or even 5000 dollars an ounce within the next few years. But the price has been declining since. In April, gold was at about $ 1,300 an ounce - and its price continues to trade under 1400 dollars, a drop of nearly 30% from its 2011 high. Many reasons can explain the bubble burst, and why the price of gold will probably fall further to stabilize at around $ 1,000 an ounce in 2015. First, the price of gold tends to buckle when serious economic, financial risks, and geopolitical threat to the global economy. During the global financial crisis, even the safety of bank deposits and government bonds was doubted by some investors. If there is concern of a financial Armageddon, it really is time metaphorically in his bunker to store weapons, ammunition, canned and gold bullion. But even in this terrible scenario, gold would be a poor investment. Indeed, at the height of the global financial crisis of 2008 and 2009, gold prices have collapsed several times. In an acute credit crunch, leverage purchases of forced sales or leads, because any price correction triggers margin calls. Gold can be very volatile - up or down - at the height of a crisis. Secondly, gold performs better when there is a risk of high inflation, insofar as its popularity as a store of value increases. But despite an aggressive monetary policy by many central banks - successive rounds of quantitative easing have doubled and even tripled the money supply in most advanced economies - the overall inflation is still low and steady decline.

 The reason is simple: when the monetary base explodes, the velocity of money slows as a result of the accumulation of liquidity by banks as excess reserves. The reduction of public and private debt keeps growing global demand below that of the offer. Companies therefore have little flexibility in their pricing because of too much capacity, and the bargaining power of workers is reduced due to high unemployment. In addition, with power increasingly weakened union, globalization has led to a cheap production of goods with high labor in China and other emerging markets, undermining the wages and employment prospects of workers unskilled workers in advanced economies. With low wage inflation, it is unlikely that there has been a steep rise in property. However, inflation fell even more today because of the overall downward adjustment of commodity prices in response to weak global growth. And gold follows the actual and expected decline in inflation. Third, unlike other assets, gold yields no income. While publicly traded stocks pay dividends, bonds have their coupons, and houses, rents, or are just a game of capital appreciation. Now that the global economy recovers, other assets - listed real estate or even the resurgent shares - now give better yields. Indeed, U.S. and global equities listed are far better than gold since the sharp increase of its course in early 2009. Fourth, the price of gold rose sharply when the real interest rate (adjusted for inflation) became negative after the various rounds of quantitative easing. The time to buy gold is when actual returns on cash and bonds are negative and declining. But the best prospects in the U.S. and global economies imply a term exit quantitative easing and zero interest rates from the Federal Reserve and other central banks, which means that real interest rates will rise rather than drops. Fifth, some have argued that the heavily indebted sovereigns would encourage investors to turn to gold because of the risks borne by the bonds. But there is an opposite situation. A large number of heavily indebted governments have substantial gold reserves which they may decide to get rid of to reduce their debts. In fact, the information that Cyprus planned to sell a small fraction - about 400 million Euros ($ 520 million) - its gold reserves led to a fall in the price of gold by 13% in April. Countries like Italy; which have massive gold reserves (over $ 130 billion), might also be tempted to do so, which would lead to a further decline in the price.

Sixth, some ultra-conservatives, especially in the United States, have so encouraged the gold rush that the effect was counterproductive. For this right-wing fringe, gold is the best hedge against the risk posed by the government conspiracy to expropriate private wealth. These fanatics also believe that a return to the system of the gold standard is inevitable, since the hyperinflation drift "devaluation" of paper money by the central banks. But in the absence of any conspiracy, and given the decline in inflation and the inability to use gold as a currency, such arguments are not valid. A currency serves three functions: it is a means of payment, unit of account and a store of value. Gold can be a store of value, but it is not a payment, you cannot use it to pay his races. It is not a unit of account the prices of goods and services, and those financial assets are denominated in gold. Gold remains so this "barbarous relic" by John Maynard Keynes, with no intrinsic value and mainly used as a safe haven against fear and panic largely irrational. Yes, all investors should have a very small share of gold in their portfolios as a hedge against extreme risks. But other real assets can be comparable coverage and extreme risk - although still present - are definitely lower than they were at the height of the global financial crisis. Even though the price of gold is likely to rise in the coming years, it will remain very volatile and will decline over time, over the improvement of the global economy. The gold rush is over.

Invest In Gold Online

Investments in gold have so many advantages, when compared with other sort of investments. Most of the paper currencies may be devalued by the governments but not the gold. Gold is the protective asset for holding the value; yes it preserves its value for your investment. When compared with various investments, by investing in gold you are enjoying the direct ownership rights and with no other investments you can claim so. Every financial expert aware the economic situation worldwide and knows the fate of paper currencies more particularly dollar is hanging.

Most of the countries over print the paper currencies and they crash which badly affects the traditional way of investments and savings. At the same time the investor holding precious metals like gold emphasize tangible value of his asset. Hence this is the right time to change over from currency based investment to investment on gold and other precious metals. Investing in gold bullion is the easy way of investment and you are enjoying the direct owner ship and the physical possession of your asset. The gold bullions are specifically minted for the purpose of investment. Chinese Panda gold coins, British Sovereign gold coins and French Franc are the globally recognized investment. There are twenty eight varieties of panda gold coins available. Other easy of investment is investing in British Sovereign gold coins and they are of superior quality. The French Franc gold coins are popular for their unique and exquisite designs. Investing in French Franc gold coin is the smart way of investment and these affordable coins come with the strong guarantee from the government.

You can directly purchase these assets and take physical delivery else it will be safely packed and delivered at your door steps. Each type of gold purchase has different benefits so it is best to call 1-877-962-1133 to find out which one best suite your investment objectives.