|Short Covering And Bargain Hunting Bolster Gold |
Los Angeles CA, (Tangible Investments) - by James O'Dell - Gold rebounded from a six week low in early morning trading on Monday, amid bargain hunting and short covering, after easing $5.70 or 0.48 percent to finish the week lower on Friday at $1,178.60 an ounce. Demand for physical Gold picked up as prices retreated, pushing premiums on the Shanghai Gold Exchange (SGE) to $4 on Monday from $1-$2 last week. Silver rose $0.01 to end the week at $16.17 an ounce, while the Gold/Silver ratio fell to 72.88.
The week began in much the same manner as today’s market action, with bargain hunting and short covering and investors watching developments in the bailout talks in Greece, beginning with Prime Minister Alexis Tsipras sidelining Greek Finance Minister Yanis Varoufakis, a key player on the country’s negotiations team, and replacing him in the ongoing talks with Greek Minister of International Financial Relations, Euclid Tsakalotos, who will now direct the team. “Prime Minister Tsipras has announced a shuffling of his negotiating team, which includes a demotion of Varoufakis,” wrote Brown Brothers Harriman (BBH) analysts in a research note.
Investors took profits on Wednesday before the release of first quarter GDP numbers and the Fed's policy statement following the two day FOMC meeting. The dollar tumbled to a nine week low, after first quarter GDP results showed that the U.S. economy grew at a disappointing 0.2 percent, well below economists’ expectations of 1.0 percent, and while analysts were anticipating a dovish tone to the Fed's policy statement, it was received as more hawkish when policymakers left open the option for a rate hike in June.
The consensus among analysts, however, is that the Fed will keep rates low at least until September as the economy gains traction after hitting a recent weather related soft patch. The Gold price dipped sharply on Thursday following a lower than expected initial jobless claims number.
In Brussels, negotiations got under way between Greece and representatives from the other 18 euro zone nations, the European Union (EU) Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF) to find a solution to the Greek debt problem. Greece’s new government, just three months old, and led by Prime Minister Alexis Tsipras, is offering its biggest concessions to date as it attempts to break the impasse in talks with its creditors.
Athens signaled late on Wednesday that it would be willing to sell a majority stake in two of its biggest ports and even concede on value added tax rates to show that it is ready to reach an accord. A new poll showed that more than 75 percent of Greek citizens believe Athens should make a deal at any cost to remain in the euro zone. Greece received some good news on Friday that should the troubled nation miss its payment to the IMF or the ECB most of the top credit rating agencies would not cut Greece’s credit rating to default.
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