Comfortably numb Fed watchers push gold price below $1,200

Comfortably numb Fed watchers push gold price below $1,200

Troops in Kodema, Eastern Ukraine in January. Source: Vice News

Traders shrugged off all potential systemic financial and geopolitical shocks on Wednesday pushing the gold price below $1,200 for the first time since the beginning of the year.

In light volume on the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – skidded to a low of $1,197.65 an ounce in mid-morning trade, down nearly $11 or 0.9% from Tuesday's close.

The gold price clawed back some of the earlier losses on Wednesday after Federal Reserve minutes released in the afternoon showed the US central bank is no hurry to lift rates even though "several" thought a later move would risk high inflation.

Current weakness has been signposted by large futures speculators like hedge funds which have been cutting back bullish positions for the past two weeks.

At the same time gold-backed ETFs saw the first sizeable drop in holdings last week after a promising start to the year.

Gold is now trading more than $100 below its 2015 high hit January 22 – a rally that came on the back of another European currency shock – as sentiment among retail buyers and institutional holders of bullion sours.

The lack of safe haven buying is hard to explain. It's not that there isn't enough to fret about. To name a few:

Wednesday's commentary from Heraeus Metals New York seems to sum up the pervasive mood on the gold market perfectly:

"Meanwhile the "Grexit" crisis still looms overhead though the financial media pundits pooh-pooh any concern of this situation going out of control. People seem to be numbed to any news on geopolitical concerns so the focus has become the future of the US economic environment."

As for how the the US economic environment and Grexit may still come together in a not so pleasant way see: Why the US will have to bail out Greece.

For another take on what Grexit and PIGS could do for the gold price see: This chart shows Grexit would send gold price to $2,000

Ukrainian troops Kodema in January. Source: Vice News