Gold prices dropped under the psychological $1,200 level as Greece and European finance ministers inked a deal on a bailout extension, reducing the yellow metal’s appeal as a haven asset.
“We agreed on four months under conditions,” Austrian Finance Minister Hans Joerg Schelling said. The move toward a long-term agreement lifted U.S. stocks and the euro higher, while gold declined almost 0.8 percent.
The precious metal recorded the fourth weekly decline in a row, the longest losing streak since early October. On Wednesday, the price reached at 1,197.20, the worst not seen since Jan. 5, due in part to signs of decreasing demand in China. Earlier Friday, gold added almost 0.6 percent after Malta’s finance chief said a German-led bloc was ready to let Greece exit the euro.
“Now that this Greek situation might be off the table, people think there’s a better place to invest, and there’s not much impetus for gold to rally,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview.
Gold futures for April delivery touched $1,197.70, at last check, on the Comex in New York. So far in 2015, the metal grew 1.8 percent as Greek uncertainty led currency volatility. Tension in the region also provided signs of slow economic growth, improving the appeal of gold as a store of value.
On Thursday, total holdings in gold ETFs grew 1.3 metric tons, the biggest in two weeks.
“You see some safe-haven inflows,” Andrey Kryuchenkov, an analyst at Natural Resources Consulting in London, said in a telephone interview. “There is lack of real liquidity. China is still on holiday, so there is no physical support to the market.”
The world’s second largest consumer of gold, China, was closed for a week from Wednesday for the Lunar New Year holiday. They will open Feb. 25, removing a key support for gold prices.
Silver futures for March delivery suffered a fall of 0.7 percent to $16.273 an ounce, trimming its 2015 rally to 4.3 percent.
What To Expect Next Week?
Going into the new week, gold prices are expected to decline further with the yellow metal facing hurdle with potential currency impacts, increasing US bond yields, weak demand from China and impending economic reports. The market will be keeping its focus on US Federal Reserve Chair Janet Yellen’s biannual testimony to Congress, on 24-25 February. Her testimony may give a boost to the US dollar, denting the demand for gold.
Economists at Nomura said the minutes from the January Fed meeting increased concerns about future US rate hikes.
They said in a note that “the apparent disagreements among FOMC participants heighten the importance of [Fed chief Yellen’s] Congressional testimony…”
