Gold Bullion Stuck Between Greek Crisis & Fed Rate Decision as PIIGS Bonds Fall, Silver ETF Jumps

By Paul Ploumis 16 Jun 2015 Last updated at 01:22:52 GMT

EDGWARE (Scrap Monster): Gold bullion prices in London trade held unchanged on Monday, as a sell-off in world stock markets continued ahead of this week's US Fed decision on interest rates.

Talks between the Greek government and its bail-out creditors broke down yet again overnight, with both sides blaming the other for refusing to negotiate.

Gold bullion traded for London delivery flattened back at $1180 per ounce after an earlier 1.1% drop.

Silver meantime rallied back to an overnight high at $16.08 even as broader commodity markets fell.

Government bonds from Portugal, Ireland, Italy and Spain all joined Greek debt in falling hard.

The Athens stock market ended Monday 5% lower.

"Apart from capital controls to avoid bank runs," notes one London bullion trading desk, "no one really has a good forecast of what will happen and the consequences for global markets, the Euro and – ultimately – gold."

But pointing to Athens' desperate need for cash, as well as Greece's 112 tonnes of gold bullion reserves, "remember the potential Cyprus gold sales of April 2013," the note adds, "which ended up with gold losing 15% in a matter of days."

Looking at this Wednesday's decision on US monetary policy from the Federal Reserve meantime, "Who knows how [markets] will react to a policy move?" asks an op-ed column from Bloomberg's Mark Gilbert.

Whether the Fed raises rates from 0% for the first time this week, or delays until September as now widely expected, "Maybe they'll panic and start selling everything in sight, making the 2013 taper tantrum -- when Treasuries lost $1.5 trillion of value in a fortnight at the merest hint the Fed would scale back QE – look like a walk in the park.

"Or maybe not...The record suggests there's nothing much to fear from a change in direction by the central bank."

Gold bullion prices have now traded within 4% either side of $1180 for the last 4 months.

In futures and options, latest positioning data from US regulator the CFTC show speculative traders cutting their bullish bets – net of bearish contracts – at the fastest pace since November last week.

"Gold has drawn limited safe-haven interest," reckons a note from analysts at London bullion market maker Barclays, "enough to stall the downside.

"But although gold has edged higher over the past week, the floor for prices is relatively soft, given the seasonally slow period for demand...compounded by continued ETP outflows and the establishment of fresh shorts."

The quantity of gold bullion needed to back shares in the world's largest exchange-traded gold vehicle, the SPDR Gold Trust (NYSEArca:GLD), ended last week at the smallest level since September 2008.

Silver holdings in the iShares Silver Trust in contrast (NYSEArca:SLV) rose again, swelling almost 250 tonnes from late May's drop to 1-year lows.

Courtesy: www.bullionvault.com