Despite the fact that investors are still worried about the situation in Europe the salvation package for Greece helped to reduce the tension and increased the appetite for “risky” assets, thus making gold decline in value.
The spot price of gold dropped 0.1% down to $1586.58/oz (9.26GMT). However, the current price is 12% higher than at the beginning of the year.
Peter Fertig, a consultant for Quantitative Commodity Research, says that the retracement could have been deeper if the crisis had been over, but it is too early to say that everything will be fine as the US federal debt limit issue is still unresolved.
On Tuesday gold reached a new high - $1609.51/oz– on fears that the Greek debt crisis could spread over Italy and Spain . However, on Thursday the EU and Greece agreed on the terms and conditions of another loan, which made gold fall below $1600/oz.
The eurozone emergency summit resulted in a decision to provide Greece with another loan - 109B euro (or $157B).
According to the Swiss bank UBS, the eurozone crisis is far from being overcome: gold may weaken in short-term perspective but Europe will be the main market driver making gold rally in mid-term perspective.
On Friday the talks on the US debt ceiling are expected to reach their climax. If Obama’s administration and the Congress fail to agree on the issue until august 2nd, the US will inevitably default on its debt.
The demand for physical gold in India, the world’s major consumer of the metal, has been low so far as the buyers are waiting for the market to clarify the direction of its further movement.
Nevertheless, gold is still strong. Today we have seen gold hitting a new record high - $1624.3/oz as some new major buyers supported the rally. Numerous tech indicators show that a retracement is highly probable. The market is waiting for a decision on the US debt ceiling.
According to the experts of the FMA_Sar Department, the failure to compromise on the federal debt limit issue makes investors switch to gold as a safe heaven asset. The high of the Asian session is $1623.80/oz. By now the price has declined down to $ $1615/oz. The markets are still concerned over the possibility of the USA’s technical default. The eurozone’s debt crisis adds fuel to the fire. That is why this week gold well may keep rallying towards new heights.
