'Umpteenth' Greek Summit Sees Gold Prices Fall, Options Expiry 'Should Keep Prices Near $1200' as Platinum Hits 6.5-Year Low

June 22, 2015

Gold prices erased two-thirds of last week's 1.5% jump against a rising US Dollar on Monday, dropping back from $1200 per ounce as Eurozone stock markets held strong gains amid hopes of a quick deal at the latest emergency summit on Greece's debt crisis.

Five years after the first such summit, "We are approaching an absolutely decisive moment," French radio was told by the European Union's economic affairs commissioner Pierre Moscovici today.

Greece's proposals "go in the right direction [and make] a good basis for an agreement," he said.

But "we have so far received no substantive proposals," countered Germany's finance minister Wolfgang Schäuble ahead of today's meeting in Brussels.

Whatever comes from today's meeting, says German magazine Spiegel online, one thing "is certain from this umpteenth summit:

"It will not be the last."

Gold prices "are coming off as the 'Greece premium' is wearing out," reckons one London bullion bank in a note.

"Further gains are possible if the situation in Greece deteriorates," says Japanese conglomerate Mitsubishi's analyst Jonathan Butler, "but given that the Dollar is likely to gain strength on the back of this, such gains may be capped."

Weaker Eurozone bond prices rallied as the Greek summit began Monday, pushing borrowing costs down for Portugal, Italy and Spain, as well as Greece.

Platinum prices meantime sank Monday to new 6.5-year lows, down some 11% for 2015 to date and driving the white metal's discount to gold – more typically a premium in the modern era – to a 3-year record at $125 per ounce.

Expecting a reversal of that trend, "Selling gold on price strength, through options or relative value (against platinum), remains our main call over the summer months," says another London bullion bank in a note.

Gold prices today dropped back to $1186 per ounce in wholesale London trade, reversing almost all of last week's rise from near 2015 lows in Euro and also Sterling terms.

But for Dollar traders, gold's three-week high on Friday still means "prices are fluctuating within a very narrow band in rather quiet conditions," says US brokerage INTL FCStone, adding that last week's gains were "boosted by concerns about Greece and the lingering after-effects of the Federal Reserve's rather dovish policy statement."

"Physical [trading] remains subdued," says ICBC Standard Bank's commodities team, with gold premiums in India and China – the two largest consumer markets – "falling to flat" with London prices last week.

This week's expiry of July gold options on the US Comex sees heavy interest around $1200 per ounce, Standard goes on, which "should help anchor prices near" that level.

Overall in US gold futures and options, latest data from regulator the CFTC show speculators raising their bearish bets on gold prices last week to the highest level since November's slump to new 5-year lows.

Bullish bets also grew however, helping the net long position held by non-industry traders rise from the previous week's 1-month low.

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Courtesy of https://www.bullionvault.com

Adrian Ash is head of research at BullionVault, the physical gold and silver market for private investors online. City correspondent for Bill Bonner’s Daily Reckoning from 2003 to 2008, and previously head of editorial at London's top publisher of private-investment advice, Adrian is now a regular contributor to many leading analysis sites including Forbes and Gold-Eagle, and a regular guest on the BBC as well as international broadcasters. His views on the gold market are frequently quoted by the Financial Times, Daily Telegraph, MarketWatch and many other leading new outlets.

 

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.

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