LONDON: Gold rose back above $1,500 an ounce in Europe on Tuesday, following three days of losses, as hopes that Greece's debt crisis may be contained tempered risk aversion and helped the euro to regain some ground.
Prices remain rangebound, however, as traders seek clarity on the euro zone debt crisis and the subsequent direction of the euro. Gold is closely linked to fluctuations in the foreign exchange markets, as it is often traded as a currency.
Spot gold rose by 0.5 per cent on the day to $1,5 04.19 an ounce at
1454 GMT, US gold futures for August delivery rose $ 9.20 an ounce to $1,5 05.60.
The euro has suffered in recent weeks from worries Greece's debt crisis could destabilise the euro zone. If these concerns are allayed the euro could recover, benefiting gold despite the fact that it would lose some of its safe-haven bid.
"There are days on which gold benefits because the risk-on trade comes back into vogue and it doesn't matter what commodity you look at, they're all going up," said Natixis commodities strategist Nic Brown.
"More recently, ETF demand has plateaued and is not really going up, so although every now and then you get a blip in gold prices on concerns on Greece and Europe generally, we have to say in terms of flows ... the big flows are finished and short of a major catastrophe, we would be surprised to see a huge amount of upside in gold based on the Greek story."
Gold priced in euros reached record highs above 1,088 euros an ounce in late May as the Greek debt crisis deepened and investors shunned assets in the single European currency.
But as the euro has stabilised and some confidence has returned to markets of Greece's ability to clear the way for a second international bailout by pushing tough budget cuts through parliament this week, euro-denominated gold has fallen.
"Even with the events going on in Europe, the euro-dollar has still been at $1.40-1.42 -- still quite an undervalued level for the dollar, despite what is going on in Europe," said Michael Lewis , head of commodities research at Deutsche Bank.
"If there is any slight marginal improvement in Europe, and if the European Central Bank is going to be starting to raise rates in September and December, you might have a currency story that could be quite positive for gold."
Greece's parliament is set to vote on Wednesday and Thursday on a new austerity programme required for Athens to receive more aid from the European Union and International Monetary Fund.
An agreement by heavily exposed French banks to roll over Greek debt and talk that European Union officials are working on a contingency plan if Greece's parliament rejects an austerity package lifted hopes its debt crisis may be contained.
OIL RECOVERS
Brent crude futures rose more than $3 on Tuesday, extending gains and pushing above $109 a barrel as the dollar weakened and optimism grew that Greece's government will pass an austerity program.
Gold's correlation with oil has been patchy in recent years, turning negative in early 2009 as the credit crunch hit economic growth while lifting risk aversion, and in early 2010 when the euro zone debt crisis fuelled interest in gold as a haven.
Gold prices could see further short-term weakness, as physical buying remains soft during the seasonally weak summer months and as the US. Federal Reserve's $600 billion bond-buying programme comes to an end on June 30.
But in the longer term low interest rates, prospects for dollar weakness and better consumer appetite for gold at lower prices are likely to support the precious metal.
"This is typically a quiet time of year for physical buyers, and the buying we've seen on this dip have not so far been of the magnitude that would be required for a proper bounce," said UBS in a note. "Should prices fall far enough, however, the physical market will react, summer notwithstanding."
"Indian buying has picked up since late on Friday, but a move down to $1,485, where many orders are sitting, is likely required to bring this market out in force. Chinese physical interest has also been tweaked by recent price action."
Among other precious metals, silver was up 1.2 percent at $33.95 an ounce, while platinum rose 1 percent to $1,688.74 an ounce and palladium was up 1 percent at $732.47.
The white metals have come under significant pressure from recent falls in industrial commodity, with platinum touching 3-1/2 month lows and palladium near six-week lows on Monday.
Source : http://economictimes.indiatimes.com/
Prices remain rangebound, however, as traders seek clarity on the euro zone debt crisis and the subsequent direction of the euro. Gold is closely linked to fluctuations in the foreign exchange markets, as it is often traded as a currency.
Spot gold rose by 0.5 per cent on the day to $1,5 04.19 an ounce at
1454 GMT, US gold futures for August delivery rose $ 9.20 an ounce to $1,5 05.60.
The euro has suffered in recent weeks from worries Greece's debt crisis could destabilise the euro zone. If these concerns are allayed the euro could recover, benefiting gold despite the fact that it would lose some of its safe-haven bid.
"There are days on which gold benefits because the risk-on trade comes back into vogue and it doesn't matter what commodity you look at, they're all going up," said Natixis commodities strategist Nic Brown.
"More recently, ETF demand has plateaued and is not really going up, so although every now and then you get a blip in gold prices on concerns on Greece and Europe generally, we have to say in terms of flows ... the big flows are finished and short of a major catastrophe, we would be surprised to see a huge amount of upside in gold based on the Greek story."
Gold priced in euros reached record highs above 1,088 euros an ounce in late May as the Greek debt crisis deepened and investors shunned assets in the single European currency.
But as the euro has stabilised and some confidence has returned to markets of Greece's ability to clear the way for a second international bailout by pushing tough budget cuts through parliament this week, euro-denominated gold has fallen.
"Even with the events going on in Europe, the euro-dollar has still been at $1.40-1.42 -- still quite an undervalued level for the dollar, despite what is going on in Europe," said Michael Lewis , head of commodities research at Deutsche Bank.
"If there is any slight marginal improvement in Europe, and if the European Central Bank is going to be starting to raise rates in September and December, you might have a currency story that could be quite positive for gold."
Greece's parliament is set to vote on Wednesday and Thursday on a new austerity programme required for Athens to receive more aid from the European Union and International Monetary Fund.
An agreement by heavily exposed French banks to roll over Greek debt and talk that European Union officials are working on a contingency plan if Greece's parliament rejects an austerity package lifted hopes its debt crisis may be contained.
OIL RECOVERS
Brent crude futures rose more than $3 on Tuesday, extending gains and pushing above $109 a barrel as the dollar weakened and optimism grew that Greece's government will pass an austerity program.
Gold's correlation with oil has been patchy in recent years, turning negative in early 2009 as the credit crunch hit economic growth while lifting risk aversion, and in early 2010 when the euro zone debt crisis fuelled interest in gold as a haven.
Gold prices could see further short-term weakness, as physical buying remains soft during the seasonally weak summer months and as the US. Federal Reserve's $600 billion bond-buying programme comes to an end on June 30.
But in the longer term low interest rates, prospects for dollar weakness and better consumer appetite for gold at lower prices are likely to support the precious metal.
"This is typically a quiet time of year for physical buyers, and the buying we've seen on this dip have not so far been of the magnitude that would be required for a proper bounce," said UBS in a note. "Should prices fall far enough, however, the physical market will react, summer notwithstanding."
"Indian buying has picked up since late on Friday, but a move down to $1,485, where many orders are sitting, is likely required to bring this market out in force. Chinese physical interest has also been tweaked by recent price action."
Among other precious metals, silver was up 1.2 percent at $33.95 an ounce, while platinum rose 1 percent to $1,688.74 an ounce and palladium was up 1 percent at $732.47.
The white metals have come under significant pressure from recent falls in industrial commodity, with platinum touching 3-1/2 month lows and palladium near six-week lows on Monday.
Source : http://economictimes.indiatimes.com/
