The price of gold and gold
futures dropped yet again Monday morning, recording the seventh
drop in nine trading days in May so far as industrial commodities, global
stock markets and the euro currency all sank amid Athens' failure to
negotiate a new coalition government.
Silver bullion also fell
hard, touching $28.44 per ounce and losing 8.9% from the start of this month.
The price of Spanish government debt today fell yet again, pushing
10-year yields above 6.2% ahead of an auction of new bonds later today.
Greek public-sector salaries and state pensions may be unpayable "from the beginning of June" says a
letter from stand-in prime minister Lukas Papadimos
to party leaders, republished by Ta Nea,
after May's tranche of the international bail-out was cut and tax revenues
came in below target.
"We do not think the gold bull market is over," says a note
from Morgan Stanley analysts, even though "gold has moved lower and is
trading at levels not seen since December 2011."
Viewed on a technical chart analysis, "Damage has certainly been
done [but] we do not think it is irreversible," they add, pointing to a
sharp rise in speculative "short selling" by gold futures traders now expecting prices to fall
"The last time positioning was at these levels, prices embarked on a
move higher, rallying to near $1800 per ounce. We are buyers of gold
The rise in speculative short-selling of gold
futures is "disconcerting" however, says Marc Ground at
Standard Bank, because "while investors have over the past few weeks
appeared cautious of running too short on gold, this fear seems to have
Over in the currency markets – where the euro fell to new 4-month
lows vs. the dollar at $1.2860 – "We continue to target $1.20 for
euro/dollar," says Ground's colleague, currency strategist Steve Barrow.
"Whether this takes time, or comes in an instant, could depend on
the outcome of Greece’s political impasse."
Energy, metal and food prices all sank once more Monday morning as
European stock markets lost more than 2% of their value, with Madrid losing
3% and Athens dropping 5.3%.
At the weekend Swedish central banker Per Jansson
said that "of course the question [of a Greek exit] is discussed."
Irish central bank chief, and fellow European
Central Bank policymaker Patrick Honohan told
journalists that "technically, it can be managed."
"We wish it to be possible for Greece to remain in the euro but
Greece must live up to its commitments," a spokeswoman for the European
Commission said Monday morning.
If Greece breaches the agreed terms of its bail-out deal then staying in
the euro would be "an impossible equation and I think in that sense it
is an irresponsible statement," said Finland's Europe minister Alexander
Stubb today about the ongoing calls for an end to
cuts in Athens.
German chancellor Angela Merkel meantime suffered a drubbing in a state
election on Sunday, with her Christian Democratic Union drawing only 26% of
the vote in North Rhine-Westphalia, giving the coalition of Social Democrats
and Greens a winning majority of 50%.
Price inflation in Germany's wholesale markets rose sharply in April, new
data showed today, while industrial production across the 17-nation Eurozone
fell much harder than forecast, down 2.2% year on year.
On the FX market, the Euro today hit fresh 42-month lows vs. the British
pound, but fell less quickly than gold
futures or bullion, with the gold price for Eurozone buyers
slipping beneath €39,100 per kilo for the first time this year.
For Indian buyers, "The weakness of the Rupee is countering the fall
in the Dollar gold price,"
says Jeffrey Rhodes, global head of precious metals at INTL Commodities DMCC
in Dubai, speaking to the Wall Street Journal.
"That's likely to act as a drag on demand in the world's biggest
"There is hardly any work these days," complains a Jaipur
goldsmith to The Times of India. "First the 21-day long jewelers'
strike and now the increasing gold
prices have rendered us jobless.
"It is getting tough for us to survive."
India's imports of gold
bullion fell by two-thirds last month compared with April 2011.
the Multi Commodity Exchange in Mumbai today
slipped back to a five-week low, down 3.3% from early May's new all-time