What’s Going On With The Gold Price?

Gold prices saw their highest level in three months as doubts about Greece’s ability to pay its debts spurred investors. But that’s not the only reason why the gold price has been volatile. Read to the bottom to learn more…

“We have limited time now, limited time and still a very important job to be done,” Pierre Moscovici, the European Union economics commissioner, told reporters at a briefing.

This is leading to a higher gold price.

“What you’re seeing now is gold driving higher on the uncertainty of what’s next, and what happens when they get to the next cliff,” saidBob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

“There’s a lot of strength in gold based on Greece,” he said.

Then there’s the algos, which affect markets in many ways.

“The algos use similar sorts of momentum-driven models — it can all be liquidity in the same way, particularly around economic data releases or when gold prices are at well-identified technical levels,” one gold market participant says.

“Real money funds investment people just aren’t playing the gold market, central banks, the whole lot of them aren’t trading the gold market the way they used to,” David Govett, head of precious metals at trader Marex Spectron, says.

They are investing less, leaving more room for algos to take over and wreak havoc.

“A lot of the trading centres around the fixing and the futures market. London has already seen that massive decline in trading liquidity and volumes,” Ross Norman, head of broker Sharps Pixley, says, referring to the twice daily gold auction used to set a price. “The fix has more prominence than ever given the spot rate has less of a role.”

Chinese demand will likely change this.

“We will undoubtedly have a Chinese fixing price before the end of the year and we will see a rapid development of a Chinese gold options market — they’ve got a very deep liquid lending market and so the idea that liquidity is moving east is correct,” one market participant says. “They do need to take stock of where the London market is going and what role it’s got to play going forward.”

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