Gold price still not profiting from Greek debt crisis

The gold price initially dipped below $1,170 per troy ounce to hit a three-week low yesterday despite hopes of an imminent agreement in the debt dispute with Greece being dampened. Gold only managed to recoup some of its losses in the late course of trading, and this morning is priced at just shy of $1,180, notes Commerzbank. The Eurogroup finance ministers broke up their special summit yesterday evening without any result having been achieved. 

Since Greece is still negotiating the list of reforms with the respective institutions, the finance ministers felt there was no basis for discussion. Talks will be resumed today. Meanwhile, the World Gold Council (WGC) has painted a relatively optimistic picture of Chinese gold demand: it looks set to total 900 to 1,000 tons this year, and could even exceed last year's level if the equity market rally comes to an end in China and the gold price begins to rise. 

According to WGC data, Chinese gold demand totalled 974 tons last year, though demand in the first quarter of 2015 declined by 7% year-on-year to 273 tons. Figures available so far indicate that the demand weakness has continued in the second quarter. If China's gold demand increases during the course of the year, however, this should lend support to the gold price in the medium term, says Commerzbank. That said, the developments in Greece are likely to have a greater bearing on the price in the short term.