Despite continued dollar strength, gold prices hit a three-month high of $1,223 earlier this week. But outflows from SPDR Gold Trust - the world's biggest gold exchange-traded fund - could put a dampener on near-term prices, although the SPDR outflows probably amount to little more than profit-taking.
The principal catalyst behind the rally was increased fears that Greece has moved close to defaulting on its sovereign debt obligations to the European Union (EU) and the International Monetary Fund. Greece's Prime Minister, Alexis Tsipras, has warned that further repayments will require more EU assistance, but Berlin is apparently having none of it.
The prospect of ever-looser European monetary policy is also buoying asset prices. Markets went into overdrive following comments by senior ECB policy maker Benoit Coeure as he raised the prospect of an expanded bond-buying program. The ECB board member suggested that the recent spike in bond yields had effectively cancelled out the benefits of quantitative easing (QE). As a consequence, the ECB could step up its purchases through next month, and possibly beyond. Controversially, Monsieur Coeure's comments were delivered at a private dinner for bankers and hedge fund managers in London, so the assembled plutocrats were in the know ahead of the next day's trading.
