On Monday, gold fell roughly 1 percent and had traders cashing in on last week’s gains from the precious metal’s five-month high. This was also just after the snap election on Jan. 25th, where the wider markets based their buying decisions on the Greek anti-austerity party taking office.
Alexis Tsipras and his Syriza party swept the victory on Sunday. The Greek leftist is set to become prime minister of the first Eurozone government outwardly opposed to the bailout conditions given by the EU and International Monetary Fund during the economic crisis. And though Greek stocks fell after news was released of the election, the broader European share market was much steadier.
The focus rests on the bond-buying plan set by the European Central Bank (ECB) last week, and its potentially positive effects. The market saw spot gold drop 1 percent off an early low of $1,275.75 to $1,280.80. U.S. gold futures for February delivery also settled by 1 percent to $1,279.40. Last week’s rise for gold was its best since mid-August, but left the precious metal exposed and vulnerable. “With the event risk out of the way, now that everyone knows what’s going on in Greece, sentiment has calmed somewhat,” says Georgette Boele, and analyst for ABN Amro. “The recovery in sentiment is hurting gold prices somewhat.”
The newly elected Greek prime minister’s pledge to confront global lenders should have ruffled some tail feathers. But the euro and European shares and bonds seemed unaffected, a clear sign of confidence regarding the abilities of the ECB’s new money printing program. The currency rebounded after the election, but not before reaching an 11-year low against the dollar. “We are now seeing profit-taking in the wake of the expected victory of the radical left-wing Syriza party in the Greek parliamentary elections,” said Commerzbank in a recent statement. “Now that the ECB’s bond purchases and the new Greek government, which had buoyed gold prices, have been announced, investors have followed “the old adage of ‘buy the rumor, sell the fact.'”
