Gold Prices Hit Channel Top at $1187 as Pimco Dumps Treasuries, Greek crisis enters final push

Author: Paul Ploumis11 Jun 2015 Last updated at 01:22:57 GMT

EDGWARE (Scrap Monster): Gold prices gained almost 1.4% against a weakening US Dollar in London on Wednesday, but held flat for Euro investors as the Greek crisis entered its "final push" and government bonds sold off again worldwide.

Western stock markets rose over 1%, but Shanghai's stock market closed the day slightly lower after global equities-index provider MSCI last night delayed adding mainland Chinese stocks to its emerging-markets benchmark, citing "a few important remaining issues" for the push-back to 2016's review.

Greek officials said they didn't know Eurozone lenders had rejected Athens' latest reform proposals until a press conference in Brussels today, reporting that they'd been told to re-work the plan.

"For this final push," said European Commission spokesperson Margaritis Schinas to the news conference, "the ball is now clearly in the court of the Greek government."

With the Dollar stabilizing at $1.13 per Euro, gold prices edged $5 lower from 1-week highs above $1192 in London's afternoon trade, while silver retreated 20 cents from a rally to $16.24 per ounce.

"If one of the reason why Eurozone yields have been on the rise," says a fixed-income note from US investment bank BNY Mellon, "is the threat that the rest of the region will, in one form or another, end up being responsible for Greece's debt then it also follows that an actual default by Athens (whether or not it actually leaves the EUR) could see regional yields spiking smartly higher."

Eurozone government bond prices fell yet again Wednesday, pushing 10-year German Bund yields above 1.0% for the first time since September.

Ten-year US bond yields reached 8-month highs however, rising near 2.5% ahead of the Treasury selling $21 billion in new debt today.

California-based investment management giant Pimco last month slashed its exposure to US Treasuries from 24% to below 9% in its $107 billion Total Returns Fund.

"By reflating the liquidity boom through huge monetary largesse," says Steven Barrow at trading division ICBC Standard Bank in London, "policymakers have...pushed the value of money down significantly against financial and real assets like stocks, bonds and houses.

"If Dollar liquidity is now stalling/reversing through dollar strength and looming US rate hikes, then it makes sense that all asset prices are vulnerable, such as stocks and bonds."

Reviewing the United States' stronger-than-expected jobs data, "The implication is that the US economy can absorb rate rises from September or October this year," says a bullion note from trading house Mitsui Global Precious Metals.

Gold prices are "trading in a one-month bear channel," says a note from bullion market maker Scotia Mocatta, "with well-defined parameters at $1158 and $1187."

Any "bounce" to that upper level, says Scotia, would only prove short-lived and "corrective, with current risk for another test towards last week’s low of 1163."