Gold and silver continued their download trend during Wednesday’s trading, despite slightly positive news of a higher than expected growth rate of Germany’s GDP in the Q1 2012 period (a growth rate of .5%). News of the new elections in Greece to be held in June raised the anxiety in the markets and dragged down the Euro. This news may continue to affect the forex and commodities markets in the days to follow.
Silver and the platinum group metals also were under pressure, along with gold. Because of their industrial nature, they’ve been impacted more by the worries of the economic slowdown in China and Europe. Like everything else they’ve been caught in the risk-off mode. Cash is king. It’s the dash for cash. Greece is heading to new elections in June and uncertainty about its status in the euro zone remains high. Because of these concerns, investors are moving to cash, especially as every new headline seems to raise worries.
Paper currencies are in vogue right now, with the dollar bid up. Until people can use gold to buy their groceries or pay their mortgage, people are keeping cash on hand.
Right now, the gold market is in the middle of a battle between the paper traders and the holders of physical metal. We are seeing huge Chinese import stats for physical gold and robust demand elsewhere for physical metal.
The overselling of precious metals created pressure resulting in a dip in gold prices.
Psychologically and technically, 1,500 dollars is the next big mark for gold.
Benchmark prices to buy gold for London settlement rallied more than $10 an ounce off new five-month lows beneath 1528 dollars on Wednesday morning, bouncing as the Euro, world stock markets and commodity prices also paused this month’s sharp liquidation.
Liquidation is taking place irrespective of market fundamentals. Jewellers don’t know what to do. Maybe when the price has stabilized at some levels, they will start to re-enter the market.
Increasingly risk-averse investors are taking refuge in the US dollar; its traditional inverse relationship with gold has been more prevalent in recent weeks. Despite its recovery, it remains vulnerable to a further drop after its longest stretch of losses in nearly five months.
Gold fell along with other more industrial commodities such as copper and crude oil, under pressure from an early rise of the dollar, which put silver on track for its longest stretch of consecutive daily losses in nearly four years.
Fears of a Greek exit from the euro zone would worsen the European debt crisis gripped European markets on Wednesday, sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.
The prospect of an improvement in physical demand for gold from the Indian jewellery sector took a knock on Wednesday with the drop in the rupee to a record low against the dollar, driven by the widespread risk aversion. Buying in India, the world’s largest bullion consumer has emerged with the decline in the dollar-denominated gold price to a four and half month low last week, but local dealers have said the weakness in the rupee could curb this.
Definitely physical buying has gone up, although demand is not overwhelming.