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Gold Prices Shows Market Complacent with the Greek Situation

The U.S. Comex gold futures climbed 1.05% this week to $1,180.40 while the Dollar Index dropped 1.38%. Year-to-date, the gold futures were almost flat. The S&P 500 Index and the Euro Stoxx 50 Index rose 0.82% and 1.32% in the same period. Bond yield rallied on Thursday with the ten-year German Bund yield now at 0.881% and the ten-year U.S. Treasury bond yield at 2.377% on Thursday. The VIX index, or the fear index, declined rapidly from 14.21% last Friday to 12.85% on Thursday. Is the calm justified?

Better U.S. and China Data
Despite the IMF has commented that the deal with Greece was still way off and the Greeks were warned not to “gamble” on Thursday, overnight, China reported better economic numbers. The May industrial production accelerated to 6.1% year-on-year while the May aggregate financing jumped to RMB 1.22 trillion, both beating expectations. The economy looks to have bottomed, and the easing measures and fiscal spending will help support Chinese growth going forward. In the U.S., the May retail sales jumped 0.7% compared to 0.1% in April, leading more sell-side economists to revise up the U.S. Q2 GDP growth.

Gold Demand
During the week ending 2 June, managed money net combined gold demand dropped for a second week by 5.64% with the long contracts down by about six percent and the short contracts up by about seven percent. In the U.S., mint sales have continued to fall this year after falling 39% in 2014. In general, global demand for jewellery, coins and bars dropped five percent year-over-year in Q1 this year as purchasers did not jump in despite the lower prices. Also the subdue inflation and a strong dollar have hurt gold prices.

What to Watch
We will monitor the May U.S. housing starts on 16 June, the U.K. and the Fed monetary policy decisions on 17 June as well as the Eurogroup Finance Ministers meeting related to Greece and the U.S. May CPI data on 18 June.

This story is provided by Sharps Pixley, for more information and content please visit: www.SharpsPixley.com

12 Jun 2015 | Categories: Gold

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