Greek Deal Tempers Gold Rush, Price Near 7-Week Low

Gold prices took a hit because of news out of Greece. After the left-wing Syriza party took control last month, the price of gold surged to about $1,300 an ounce. But, thanks to serious compromises from the Greek government for an extended bail-out plan, gold has plunged back down to $1,200. Still, with only four months of funding for Greece, and EU governments hesitant to continue the funding plans, another uptick could be right around the corner.

The Guardian reports that Yanis Varoufakis sent a letter to Brussels outlining the new government’s policy proposals. According to the letter, many of the promises Greek Prime Minister Alexis Tsipras made on the campaign trail have been scrapped to win support from other EU governments. Tsipras will have a difficult time explaining the concessions to his anti-austerity supporters, but he seems to have secured the confidence of investors, for now.

Reuters reports the spot gold price was $1,202.70 per ounce at 7:49 a.m. GMT. Likewise, mining.com reports that hedge funds have tempered their bearish positions on gold futures, reducing their net-long positions by 44 percent — that is to say, many of them no longer believe gold prices will go back up in the future.

The hedge funds may seem fickle, changing their attitudes based on one negotiation in what promises to be a long, arduous fight over the Greek debt crisis. But it keeps with the general trend. The price has been gradually declining as the U.S. and world economy continue to show signs of recovery from the 2008 crisis.

Gold is the investment of choice for people believing the world will soon crumble around them. According to Nasdaq data, after the 2008 financial crisis, gold prices surged from a low of about $750 an ounce in November, 2008, to over $1,800 in late 2011.

As other investment instruments, like stocks, have regained their footing, gold’s popularity has dwindled.

Still, a number factors might keep the price afloat.

In the short-term, gold’s second biggest consumer, China, will soon reopen its financial markets, allowing their investors to push up the price.

In the U.S., the Federal Reserve continues to keep people guessing about when interest rates will go up now that the unemployment rate has dropped below 6 percent. As previously reported by the Inquisitr, some fear that when the Fed removes the low interest rates and other monetary support, the stock market will take a dive, which will also likely lead to an uptick in the price.

Then there’s still the Greece crisis. The first battle may be over, but the next one is only four months down the line. The crisis remains unstable, which will likely reflect in the price of gold for some time to come.

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