Gold hit a three-month high on Monday, driven by fears over Greece’s ability to pay debts and soft economic data in the US.
The price of gold peaked at $1,232.20 Monday, before sliding a bit on Tuesday. CNBC reports a sharp rise in the euro and indications the European Central Bank may speed its 1 trillion euro ($1.12 trillion) bond-buying program stalled gold’s five-day rally Tuesday. Uncertainty about what the Federal Reserve will do regarding interest rates in its meeting Monday also weighed on the market.
But the long term trends that sparked the climb in gold prices over the last week remain firmly entrenched. The Greek situation appears nowhere near a resolution, and as the Wall Street Journal reports, fears surrounding Greece’s future played a large role in the recent gold rally.
Gold prices carved out new territory as investors refocused on the threat of a potential sovereign debt default by Greece. Athens and its international creditors remain split on the fiscal and economic reforms needed to heal the Greek economy, leaving the door open to a default that could lead to the country to exit the euro. Greece’s current bailout expires at the end of June.”
Investors in Germany have turned bullish on physical gold, indicating they take the situation in Greece quite seriously. Last week the Telegraph reported, “German investors have piled into gold bars and coins in the first quarter of the year as a hedge against European Central Bank policy and the threat of a Greek default bringing down the eurozone.” Alistair Hewitt of the World Gold Council said:
This was the strongest start in Europe for gold coins and bars that we have seen since 2011… German investors are fretting over the ECB, Greece and Ukraine.”
Soft economic data in the US and speculation that the Fed will not raise interest rates in the near future also provided upward pressure on gold prices, according to a Reuters report.
