Gold bears too complacent about Grexit
In quiet afternoon trade in New York, gold for delivery in April fell by $5 an ounce from Friday's close to exchange hands for $1,274.40 an ounce.
The metal is still trading up some $90 or 7% in 2015, but the strong upwards momentum and break above $1,300 was halted last week Thursday when the price plunged $35 during the worst trading session in more than a year.
Capital Economics believes falling oil prices encouraging further loosening in monetary policy around the world and events in the eurozone will support the gold price this year:
"The sanguine response to the Syriza victory reflects confidence that the new government and the Troika will reach a mutually acceptable solution to Greece’s debt problems, the still-low probability attached by investors to Greek exit from the euro, and faith in the ECB’s ability to limit contagion. This all seems complacent to us.
"Expectations that Greece’s fiscal problems can be addressed by a “restructuring” of its debts overlook the fact that most of the viable adjustments have already been made. Only a substantial write-down will materially alter Greece’s debt trajectory – an option that the Troika will very strongly resist."
The independent research house expects the gold price to reach $1,400 per ounce by the end of the year. That's on the high end of consensus estimates.
A new survey by the London Bullion Market Association of 35 analysts, indicated gold will trade in a narrow band this year to average $1,211 a troy ounce with a range between $1,085 and $1,356 during 2015.
Photo of painting The Death of Socrates by Jacques-Louis David (1787) taken by Thomas Hawk