Dec 10 (Bullion Desk) —  A risk-off tone prevailed in financial markets overnight, helped along by further falls in oil prices, a sharp correction in Chinese equities yesterday and an announcement of a snap election in Greece. The precious metals complex recovered strongly as a USD sell off fuelled a strong rally in gold and other precious metals markets.

Investors were seen buying up gold in reaction to a sell-off in the Chinese equity markets following a week of gains, as well as news on the tightening of credit conditions in China. News out yesterday said the People’s Bank of China took measures to tighten liquidity by imposing stricter collateral rules on short-term loans; there was also talk of an imminent decrease in reserve requirements.

In other news, Eurozone finance ministers decided to extend Greece’s bailout program by two months to February 2015. This decision was followed by the Greek government’s announcement that it intended to expedite the presidential election, originally expected to take place by February 2015. The surprise election decision hit the Greece stocks market hard, falling 11.2 percent, its hardest fall since 1987 as investors mull the possiblity of an opposition victory as well as the uncertainty over Greece’s economic stability.

Gold price jumped more than two percent on Tuesday, gaining $27 to end at $1,229.30. During the Asian trading session today, prices remain near its closing price at $1,229 per ounce. Silver also broke through the $17 mark to end the day at $17.07 per ounce. Current prices are slightly lower at $17.05.

“The best chance for gold to go higher would be for the financial market to become unverved over equity declines in China, fresh sovereign ris worries in the euro zone and currency markeet volatility. It is possible, if the markets are experiencing heighentened risk concers, for the USD and gold to rally simultaneously, as happened furing the financial crisis,” said HSBC Securities analyst James Steel.

PGM prices were pulled higher by gold as well, with platinum up more than a percent on Tuesday to end at $1,249 per ounce. Current price are however lower at $1,244. Palladium is a dollar lower today at $808 after gaining one percent as well.

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