Skip to: Content
Skip to: Site Navigation
Skip to: Search


Gold prices to climb if Greece gets fixed

Gold prices fall when dollar strengthens, as it has during latest Greek crisis. Gold prices will recover when Greece's path is clear, says a gold expert.

By Antonia van de VeldeCNBC.com / May 21, 2012

This 2008 file photo shows an employee displaying a bar of one kilogram fine gold at a plant of gold refiner and bar manufacturer Argor-Heraeus SA in Switzerland. Gold prices have fallen since May 6 when Greek elections threw the nation into political turmoil. Once Greece's path is clear, gold prices should recover, says a gold expert.

Arnd Wiegmann/Reuters/File

Enlarge

Gold, used an alternative to the U.S. dollar by investors in search of safety, could see a move higher once markets have greater clarity on a resolution to the Greek debt crisis, Marcus Grubb, managing director of investment at the World Gold Council, told CNBC on Monday.

Skip to next paragraph

Spot gold, currently trading around $1,595 an ounce, has not acted as the traditional safe haven in recent weeks, with investors preferring the U.S. dollar.

Gold prices have been on the decline since May 6 elections in Greece threw the country into political disarray, fueling fears of a potential euro zone exit by the country. The precious metal regained some ground at the end of last week, however.

“Gold is correlated negatively in the long run with the U.S. dollar, so if there’s a strong dollar you will see a headwind against the gold price,” Grubb told "Squa.

“Investors are buying U.S. Treasurys and U.S. dollars as a hedge against the current macroeconomic situation – the concern about the euro zone, about Greece,” he said.

“As we've seen in previous times in this crisis like in 2008, you typically get a shift into gold once it becomes clear what the scenario is going to look like. At the moment we still don’t know what the scenario will look like. On the other side, investors have been selling gold as they’ve raised cash weightings, moved into the dollar, invested in Treasurys. They've sold gold in order to repair damage in their portfolios,” he added.

Global gold demand was down five percent in the first quarter of 2012, the World Gold Council’s Gold Demand Trends report showed.

“There were a number of negatives in the first quarter…but I think they were offset by the positives, which is why gold demand was only down about 5 percent in tonnage terms,” Grubb said.

“Some of the investment categories were very weak. India was very weak because of two import taxes and an excise tax that caused a strike across most of the states in the jewelry industry, so that disrupted the market," he said.

India, the largest gold market in the world, was down 29 percent in the first quarter.

“That was offset by China, which is still in a very strong growth path, up 10 percent,” Grubb said.

Exchange-traded funds and central bank buying also helped offset the drop in India, he said.

Read Comments

View reader comments | Comment on this story

  • Weekly review of global news and ideas
  • Balanced, insightful and trustworthy
  • Subscribe in print or digital

Special Offer

 

Doing Good

 

What happens when ordinary people decide to pay it forward? Extraordinary change...

Danny Bent poses at the starting line of the Boston Marathon in Hopkinton, Mass.

After the Boston Marathon bombings, Danny Bent took on a cross-country challenge

The athlete-adventurer co-founded a relay run called One Run for Boston that started in Los Angeles and ended at the marathon finish line to raise funds for victims.

 
 
Become a fan! Follow us! Google+ YouTube See our feeds!