Gold rallied to its highest in nearly two weeks on Monday after a raft of unsettling news on indebted eurozone nations such as Greece and Italy dented investor confidence. Spot gold rose by as much as 0.67 percent on the day to hit $1,517.49 an ounce, its highest since May 11 before retreating to $1,508.96 by 1316 GMT.
Gold priced in euros hit a record high of 1,080.04 euros an ounce. The trigger for gold's rise was the decision on Friday by ratings agency Fitch to cut Greece's debt ratings by three notches.
Further reasons to buy gold were doubts about Spanish austerity measures, an outlook downgrade to Italy's credit rating and growing speculation about Greek debt restructuring.
The euro tumbled to a two-month low against the dollar, prompting another sell-off across the commodities complex, which has lost 9 percent so far this month, sparking a rush for perceived safe-haven assets such as gold or German debt.
"If we hadn't had a safe-haven bid, gold would have been quite a bit lower, because we're still seeing this washout in commodities being repeated again today," said Saxo Bank senior manager Ole Hansen.
"It's still worth pointing out that the correction we've seen recently has been less than the previous three and given the severity of the corrections elsewhere, it's been holding up pretty well." Gold has fallen by nearly 3.5 percent so far in May, compared with a 28-percent drop in spot silver, a 13.3 percent fall in Brent crude futures and a 6-percent fall in benchmark copper.
"The driving factor is obviously concerns about Greece and whether there will be a debt restructuring," said Robin Bhar, analyst at Credit Agricole. "Greece is important in terms of the implications it will have for other weak eurozone economies such as Ireland and Portugal. Markets have started the week in risk-off mode."
Greek Prime Minister George Papandreou will discuss new measures with his cabinet on Monday to cut the budget deficit, in an effort to convince lenders Greece can deal with a debt crisis without a restructuring. The decline in the price of gold has attracted fresh investor buying, as reflected by inflows into exchange traded funds (ETFs).
Gold ETFs saw their first daily inflow in nearly three weeks on Friday, which was also the biggest one-day inflow in a month thanks to a 341,000 ounce rise in holdings of the largest gold-backed ETF, New York's SPDR Gold Trust, reversing the outflows of the week.
In more industrially-focussed precious metals, ETF holdings fell last week, showing investors turned away from the likes of silver, platinum and palladium. "Investors still seem to be leaving platinum and palladium ETFs in droves," a precious metals trader said.
Spot silver was down $34.64 ounce and platinum at $1,747.49 from $1,768.50, while the platinum price was down 1.4 percent at $1,744.24 an ounce and palladium was down 1.8 percent at $720.97. Platinum ETFs shed 18,000 ounces of metal last week in their largest weekly decline since the week of March 25. Palladium ETF holdings have fallen for five weeks on the trot now, down 48,000 ounces last week.
Both platinum and palladium are used to make autocatalysts for cars, production of which is expected to accelerate this year and next. "Given the positive fundamental backdrop, we think the risks are rather skewed to the upside, with $1,780 marking an important resistance for platinum and $730 being a key level for palladium," Credit Suisse private banking said in a note.
Comments
Comments are closed.