Yesterday (24/6), the gold weakened for 4 days continuously, to the lowest in the last 2 weeks, as the dollar “flourishes” and the cautiousness of investors waiting for news from Greece. During the session, price had slipped down to $1.170/ounce, then closed at $1,175.09/ounce, down 0.7% compared with the opening price ($1,178.16/ounce).
Currently, at 3:55 pm GMT + 7, the price is at $1,174.29/ounce.
Today is the 3rd day of the European finance ministers meeting , as well as the start of EU summit. Greece’s debt crisis is still the main topic of conversation. Yesterday (24/6), Greece’s proposal was rejected, while the creditor has sent Greece a new request in order to remove deadlock on negotiations. Thus, it can be seen that two sides are still making great efforts to be able to reach an agreement to help Greece escape the risk of default and Grexit.
Greece’s debt crisis has lasted for many years, “confused” investors from time to time. However, until the present time, whether Grexit have enough influence to cause great volatility in the market? Now, it seems that traders are not too bothered about Greece, but are concerned about the Fed’s rate hike instead.
Therefore, the demand for gold as “shelter” will probably cool down, dragging down gold price.
In addition, there are several factors may adversely affect the price of gold as:
Yesterday (24/6), US Department of Commerce trported that QI/2015 GDP growth decreased by 0.2% compared to the same period last year, better than last month’s forecast (-0.7%). Economic growth begins to regain momentum in the second quarter of this year with favorable weather and fewer strikes.
Consumer (accounting for over 60% of US GDP), recorded a growth of 2.1% in the first quarter, compared with estimation of 1.8%; while the real estate market is better, increasing the value of houses. Personal savings jumped to $720.2 in the first 3 months of 2015. Moreover, the labor tightening is a sign of inproving wage growth, so the consumers can boost spending more in second quarter. These positive figures strengthen the Federal Reserve rate hike earlier in the year and adversely impact the gold price.
US stocks show signs of rebound on good news about the economy, attracting capital to flow into the stock market, indtead of precious metals.
Tonight, the US will release data about unemployment claims, personal income, flash PMI service sector, along with the speech of the Fed Governor Jerome Powell. If the data is positive, it;s likely that Powell’s speech will support for dollar then pull down gold prices.
However, gold prices also have the ability to “bounce” back under the impact of a number of factors including:
About Greece: Greek lawmakers have reacted angrily to the Athens government’s concessions in the reform proposals sent to the creditors. Syriza party also occur internal division this issue. Whether this reforms can be implemented or not, when there are internal conflicts. If the conflict continues, it’s highly likely that an early election will happen, or even worse with a coup. The risk of political uncertainty will increase the attractiveness of gold.
China has ambitions to build gold pricing system by renminbi. The draft plan has been submitted to the People’s Bank of China (PBOC) a few weeks ago. In addition, last week, the Bank of China has engaged in LBMA Gold Pricing. As a leading gold consumer in the world, the Chinese wants to use their mysteryily enomous gold reserves to empowering renminbi, against dollars. This may be good news for gold prices in the medium term.
Today reserves in SPDR Gold Trust rose slightly 0.3% to 706.37 tonnes, a positive sign for the precious metalsmarket.
Forecast: Gold prices are likely to fall toward $1.168/ounce.