Gold dances to a Greek tune

Gold continues to jive up and down, with “The Greek factor” playing the tune, and the inflationary bogey dictating the rhythm. Overall sentiment remains bullish, as the precious metal has gained around 11% since the start of 2012, going above $1,700.

The gold market cooled on Thursday’s announcement from Mario Draghi, the head of the European Central Bank, the risks to the Greek economy are diminishing. Prices went down to $1,730 an ounce shortly after they reached their heights of about $1,750.

Thursday had seen the gold price rise after China released disappointing January inflation numbers. January statistics from China showed a 4.5% year on year growth of consumer prices, which added another 0.4% to a December figure. This was coupled with the good news from Greece, where the party leaders agreed on more belt-tightening measures.

Indeed, the negotiations between Greece and its creditors have a certain say in determining the gold price, Ronald Leung, a dealer at Lee Cheong Gold Dealers told Reuters.

“Greece seems to be coming closer to concrete agreements, which presses the dollar and supports the gold prices,” he said.

Despite this the commodity is really volatile, the consistent bullishness will remain, Rob Edwards, chairman at Renaissance Capital, told Business RT.

“The real demand from India and China remains very strong, whereas we’re seeing interest rates remain low. The Fed has indicated that those will remain low for a long time, which means that we don’t see the investment demand for gold will really destabilize. It’s still a very valid investment instrument,” he explained.

“Living in the age of volatility gold will still remain relevant. We don’t see it breaking below $1,500 per ounce,” Edwards specified.

Overall, gold prices grew almost 10% in 2011 and have already grown 11% in the first month of 2012.

This 11–year long growth in gold prices is the longest since 1920. Since 2000 it has gone up from about $280 per ounce to about $1,700 per once in February this year.