(MENAFN- ProactiveInvestors) Gold endured a tough few days even though Greece seemed to be moving towards its exit from the Eurozone after a series of compromises were rejected by the Germans.
The refusal to allow the Greek government an extension of its emergency aid programme meant Friday afternoon was all the time left to come to an agreement.
Reports in Germany had suggested that the European Central Bank had drawn up contingency measures to contain the fallout of Greece’s exit but it still had the potential to be very destabilising for the EU said economists and boost gold’s safe haven appeal.
Even the continued dovish tone in the minutes of the US Federal Reserve’s latest interest rate meeting provided little cheer. Indeed gold was heading for its fourth weekly decline in a row.
The minutes did spark a rally in the spot price but it was a half-hearted affair as strong US economic data soon after pointed to a US rate rise coming sooner rather than later.
When US interest rates will go up has been weighing on the gold price for the past two years. Higher rates should boost the US dollar and Treasury bond yields both of which are traditional counterweights to gold.
A ceasefire in Ukraine albeit flaky and the start of Chinese New Year celebrations also weighed on the metal.
The pattern in recent years has been for the price to run-up in January and early February as gold is a popular New Year’s present in China. Demand tails off sharply afterwards however.
Gold supporters are hoping this year may be different following a decision by the Indian government to allow gold to be used as collateral for loans again.
Reports out of India have suggested import duty on gold will also be lowered from the current 10% in the budget at the end of the month.
That could see Indian gold imports doubling to 75-90 tons per month enough to offset any dip in Chinese consumer demand suggested Commerzbank.
The broker noted the wedding season begins in India in March to be followed by an important religious festival in April. China and India are by far the largest retail consumers of gold.
Having dipped below US$1200 briefly during the week the price was hovering around US$1210 shortly after trading got underway on Wall Street Friday a dip of some US$25 week-on-week.
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