Gold price hits fresh 3-mth high on renewed ‘Grexit’ concerns

May 18, 2015 - 10:41 AM GMT
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The gold price continued to build on gains made in the previous week on Monday, with increased fears over a Greek exit from the eurozone and the prospect of a delay to the normalisation of US monetary policy providing support.

Spot gold was last at $1,229.00/1,229.80 per ounce, up $6 on Friday’s close. It hit a fresh three-month high earlier at $1,232.50.

Other metals are also performing strongly – silver also hit a fresh three-month high at $17.78 and was last at $17.69/17.74 per ounce, up 25 cents.

“Gold is leading the precious metals higher this morning, with prices overcoming last week’s highs. Silver and platinum are following, while palladium seems in less of a hurry. For now gold and the others look well placed to extend gains,” FastMarkets analyst William Adams said.

The gains reflect the growing likelihood of Greece exiting the Eurozone. Two documents over the weekend shed light on the parlous state of Greece’s finances – first, in a leaked note, the IMF said it believes there is “no possibility” of Greece meeting its debt obligations over the summer unless bailout funds are unlocked.

And Prime Minister Alexis Tsipras, in a letter to the IMF, warned that Greece is almost out of cash and would miss repayments unless the European Central Bank immediately raised restrictions on the country’s ability to issue debt.

Although Greece must implement heavy economic reforms to unlock a third aid package, Tsipras is reluctant to go back on anti-austerity promises made in his election campaign.

Also bolstering sentiment is Federal Reserve Bank of Chicago president Charles Evans’ renewed call for the US central bank to refrain from raising interest rates until early next year.

In a speech prepared for delivery on Monday, he said that allowing inflation to rise above the two-percent target “made sense” to achieve growth targets more quickly.

“Economic activity appears to be on a solid, sustainable growth path,” he said. “However, the weak first-quarter data do give me pause, and I would like to see confirmation that they are indeed a transitory aberration.”

First-quarter US GDP growth may be revised into negative territory and there are indications that the slowdown may continue into the second quarter.

The dollar was last half a cent stronger at 1.1378 against the euro, having hit its worst since February on Friday at 1.1466 following a string of poor data.

In gold-specific news, India reportedly imported 111 tonnes of gold in April, far above consensus and close to the 125 tonnes imported in March.

The Indian Ministry of Finance attributes the increased imports to seasonally higher demand and lower gold prices.

In the PGMs, platinum was last up $5 at $1,164/1,169 per ounce, while palladium was up $2 at $789/795 at the start of LPPM.

(Editing by Mark Shaw)