Gold dipped as an uptick in the dollar offset the supportive impact of concerns over Greece’s future in the euro zone and fears over escalating violence in Ukraine, which hurt risk appetite. A rise in the dollar against its currency basket led gold to stall after the previous day’s rise, preventing a steeper recovery from Friday’s three-week low. Prices seen under pressure after upbeat U.S. jobs data fuelled expectations that the Federal Reserve will raise interest rates this year, overriding concerns about the economic health of the euro zone, which lifted prices 8 percent last month.
Those concerns are now reasserting themselves, with nervousness over Greece potentially withdrawing from the euro and the conflict in Ukraine weighing on global markets on Tuesday. Investors will now monitor a Greece-dominated meeting of euro zone finance ministers on Wednesday.
Euro-priced gold stood just below 1,100 an ounce on Tuesday. They hit their highest since April 2013 at 1,156.14 euros on Jan. 26. The probability of Greece leaving the euro zone has risen several notches as Prime Minister Alexis Tsipras has taken an increasingly hard line over government debt. European Commission President Jean-Claude Juncker told Greece not to expect the euro zone to bow to Tsipras’ demands in a growing confrontation that has rattled financial markets and prompted U.S. and Canadian pleas for calm and compromise.
On the main physical markets for gold, premiums over spot prices on the Shanghai Gold Exchange contracted slightly ahead of next week’s Lunar New Year holiday but remained between $2.50-3.50, showing demand has emerged at lower levels. Technically market is under long liquidation as market has witnessed drop in open interest by -0.11% to settled at 8062 while prices down -88 rupee, now Gold is getting support at 26783 and below same could see a test of 26710 level, And resistance is now likely to be seen at 26957, a move above could see prices testing 27058.
Silver edged lower following rumors of a possible six-month extension on Greece’s debt. Prices briefly hit the lowest levels of the session after rumors surfaced that the European Commission could propose a six-month extension to Greece’s bailout program, which is due to end on February 28.
Prices were slightly higher earlier in the day amid concerns over Greece’s future in the euro zone as negotiations with the European Union over the country’s debt and bailout continued. Meanwhile, the growing possibility of an earlier Federal Reserve rate hike also weighed, following last week’s robust U.S. jobs report, which saw market players bring forward expectations for the first rate hike to June.
Expectations of higher borrowing rates going forward is considered bearish for bullion, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise. A government report released earlier showed that Chinese inflation for January slowed to 0.8%, the lowest since November 2009, from 1.5% in December. The producer price index fell by a more-than-expected 4.3% last month, giving policymakers in Beijing more room to ease monetary policy.
A Commerce Department report on Tuesday showed U.S. wholesale inventories edged slightly higher in December, after having reported a notable increase last month. Wholesale inventories inched up by 0.1 percent in December after climbing by 0.8 percent in November. Economists expected inventories to edge up by 0.2 percent. Technically market is under long liquidation as market has witnessed drop in open interest by -0.69% to settled at 9022 while prices down -199 rupee, now Silver is getting support at 37202 and below same could see a test of 36805 level, And resistance is now likely to be seen at 37973, a move above could see prices testing 38347