Gold still dubbed safe haven despite 20% drop in price per ounce.
Gold prices last week fell 3% due to concerns over the Eurozone debt crisis, with analysts describing the market for the metal as “much more fragile” than last year.
In a report by Resource Investing News it was said that resistance from voters in France and opposition to austerity measures in Greece had caused a drop in gold prices.
Gold hit a peak price of $1,900 (£1,216) per ounce in September 2011, but in the past eight months the price has fallen by 20% to below the £1,000 mark, hitting a price of $1,751 (£974) per ounce last Friday.
Suki Cooper, vice president and precious metals analyst within Barclays Capital‘s Commodities Research team told Resource Investing News: “Gold [has] struggled really because of the physical market. It has proved to be much more fragile this year than it had [been] last year.
“Last year we saw the two key buyers, India and China, continuously coming in to support the dips. This year activity has been a little bit lacklustre, but we still think the macro backdrop is gold favourable.”
It is thought that H2 will lead to a rise in demand in India, with seasonal traditions potentially leading to an increase in gold prices and demand. India’s federal government’s decision to cease the excise duty that it placed on jewellers earlier this year may also help the appreciation of gold prices.
This morning Reuters announced that gold gains “could be capped by fears about a worsening debt crisis in Europe” following Greece’s inconclusive election and failure to form a government. Worries that the country could exit the euro and the European Union have meant that gold is now trading in line with other risk assets.
Reuters also stated that in the physical gold market jewellery makers and speculators took advantage of last week’s drop in prices.
A dealer in Hong Kong told the press agency: "We’ve seen physical buying interest. But people are still bearish about the market because of the strong dollar and worries that Greece won’t be able to solve its problems.
"Investors are not so aggressive, and I think the jeweller sector is more important. Supply is a bit tight in the physical market."
The silver market is also sluggish, with the metal falling below the $30 (£18.60) last Friday.
Disappointing trade data from China, owing to below-expectation exports and imports in April, left analysts disappointed after they forecasted a double-digit increase in imports. Instead Chinese imports increased just 0.3% while exports were up only 4.9%.
Resource Investing News also highlighted the amount of silver in COMEX warehouses, which has surpassed the 142 million ounces mark, as shown by recent Commodity Futures Trading Commission data and said to be the highest level since 1997, according to Bloomberg.