Gold Prices Spike on Greek Rescue Plan
Gold for April delivery closed up $32.60 at $1,758.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,759.50 and as low as $1,727 an ounce while the spot price was adding $22, according to Kitco's gold index.
"A big vote of confidence from the Base Metal market today as the complex finished up strongly, wiping out much of the loses from last week," said analysts from RBC Capital Markets. "The resolution on the Greece bailout package helped bring in some short covering and fresh longs from the fund community."
RBC believes the economic picture, particularly in developed countries, is improving. As a result, the analysts believe risk appetites among metals investors should increase.
Jon Nadler, senior metals analyst at Kitco Metals, noted that market action has hinged on Greek headlines for weeks, with equities and the euro rising on positive news and falling after missed deadlines. With the deal now in place, Nadler believes investors can return their focus to the bigger -- and more problematic -- picture.
"Now that the red wax seal is drying on the 130 billion euro package and the many strings that are attached to it, the markets can focus on the remaining troublesome items -- banking sector problems and Greece's own inability to avoid coming back to knock on the EU's door for more assistance, at a later date," said Nadler. "There appears to be little doubt that in order for the country to bring debt down to 120% of GDP such further help will be necessary. As things stand right now, if Greece is lucky, that ratio might get down to 129% by -- 2020 or so."
Gold prices were also getting a boost from China's decision to lower its reserve requirements for banks. The People's Bank of China announced over the weekend that it was knocking down it's reserve-requirement ratio by 0.5%, a move aimed at boost lending. Some are interpreting this as a sign that China's economy could be slowing.
Gold mining stocks were riding gold prices higher Tuesday. Kinross Gold
Other gold stocks, Agnico-Eagle
-- Written by Ross Tucker in New York.
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