Gold Market Update 7-10-2015

Gold had a bumpy ride last week but despite some excitement on the markets it ended up not really going anywhere in the big picture. Some gains in weekend trading took it up to $1,170 by Sunday night, but as soon as markets opened on Monday the spot price immediately went into freefall. It dropped to just under $1,155 by late Tuesday before rallying and slowly gaining back some value through the rest of the week. The final price was $1,162.90. That’s $5.30 down on its previous close, but at barely over half a percent it’s still not enough to worry about. In general we think gold’s done quite well to sink so little in one of the most stressed weeks the global economy has seen in a while.
The big news has been Greece, of course. We expected that to be close to resolved, one way or another, last Monday. It isn’t. The end really can’t be far off now though because Greece is running out of money rapidly. Even with capital controls in place the banks are on a knife edge; cash could run out at any time. All last week the equities markets and exchange rates were fluctuating wildly in response to every new rumor coming out of Brussels or Athens. The Euro fell sharply as soon as markets opened then recovered, only to fall and bounce twice more through the period. It finished slightly up on the week before as the Greek government looked set to cave in to Germany’s demands for spending cuts.
Meanwhile the Dow Jones spiked Monday, then fell and stayed down until a rapid regain beginning Thursday took it 60 points above the Friday before, closing at 17,760.That probably reflects increasing uncertainty in the US at the prospect of a Greek collapse; the White House has been busy pleading with the EU to find a solution and many analysts now think a Greek exit could weaken the Euro even further. That may be behind Germany’s calculations but it would be bad news for the still-struggling export sector, so any deal is likely to push the Dow higher – and that’s bad news for gold.
European exchanges were volatile too, with the FTSE 100 dropping like a stone on Monday and Tuesday then picking back up, gaining around 50 points by Friday afternoon. Normally we’d have expected gold to fall on that news but continued downward pressures on Chinese stocks could be fueling demand and helping keep the price close to stable.
Meanwhile oil prices are sharply down again, after several weeks with little movement. WTI ended Friday trading at $52.74 and Brent at $58.73. That’s a drop of over $4 on both benchmarks, much more of a change than we’ve seen for a long time. Oil isn’t looking like being an investment rival to gold any time soon.
So not a great week for gold, but considering the overall market situation not really a bad one either. With the major equities markets gaining ground we’d have expected to see the spot price fall further than it did, so there’s a good chance of some gains when everything else settles down a bit.

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