Greek endgame looks to be here. Gold back up through $1200

Julian Phillips sees Greece likely exiting the Euro perhaps next week which he sees as positive both for the Euro itself and for gold.

While New York ignored the Greek crisis in its financial markets gold appeared to be reacting to the tragedy that seems to be entering its finale.  The ECB told a meeting of Eurozone finance ministers that it was not sure if Greek banks, which have seen large daily deposit outflows [€2 billion in the last three days], would be able to open on Monday 22 June.

It is also possible that Greece may have closed its banks by then, so as to change its currency to the Drachma. After all, why wait until the banks are completely empty? But there is a reason why. If the banks are empty then the adoption of a new currency together with Exchange & Capital Controls would be seen as a pre-emptive strategy, not a reactive one. If Greece looks to be a victim, the new government will be able to makes such changes as a necessity, due to the harsh treatment by the E.U.

It appears that Greece has asked for a write-down of its debt. This is a clever tactic, because once it is in default, creditors will have to consider such, so as to be able to get back at least something, certainly not all of it. Monday will see the final decision of the E.U. We see it as having to say no. Looking at the globe’s financial institutions, we see an exit as being disturbing to markets but good for a stronger euro and for gold.

Next week is likely to be a volatile week for gold and other financial markets across the world.

Silver is following gold cautiously waiting to see if the current rally will hold.

Markets

New York closed yesterday at $1,202.10 up $15.00.  The dollar is at $1.1317 down 0.7 of a cent with the dollar index back up to 94.38 up from 93.87. The LBMA Gold Price was set at $1,198.15 barely changed on yesterday with the equivalent euro price at €1,058.90 up €7.68. Ahead of New York’s opening, gold was trading in London at $1,202.00 and in the euro at €1,062.31.

The silver price fell to $16.20 up 3 cents in New York. Ahead of New York’s opening it was trading at $16.19.

The rise in the gold price was due to short covering and to dealers moving prices up to protect their books, in a thin market. From Monday on we will be watching the LBMA gold price setting to see if we can discern the presence of the Bank of China. It is unlikely we will see them as they will simply take up available stock ensuring they don’t push prices higher by themselves.

There were no sales or purchases of gold from or into the SPDR gold ETF but a purchase of 0.3 of a tonne into the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 701.897 tonnes and at 167.01 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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