Julian Phillips’ commentary on the Greek election reult and on latest gold and silver price movement in the markets.
The result Eurozone officials feared most in Greece happened over the weekend with the far left party coming into power with all but one of a clear majority in Parliament. It is clear to observers that unless the E.U. agrees to write down debt and allow a turnover of austerity measures, the new government will have to leave the euro. It’s one or the other. Certainly, Greece is a drag on the euro as is Spain, but without them the euro would be much stronger, something Germany and other member states don’t want, so they must weigh this against agreeing to Tsipras’ terms and keeping Greece in the euro. What is a certainty is a painful path from now on for the euro and E.U. itself ensuring ongoing uncertainty in Europe.
Today the euro tried to fall below $1.12 but suddenly the euro is rising. The next few days will see the news on Greece being digested. But we mustn’t forget that the E.C.B. is soon to start its QE program. Will the E.C.B. buy Greek bonds against this background? February will see a decision on this come as Greece must renew debt obligations or default then. We do expect to see a weaker euro, at least up until then.
The ripples out from where this particular stone hit the water, covering Europe and the rest of the world have yet to be seen. Whether Greece stays in the euro or leaves it, we believe the resulting scene will be positive for the gold price. .This is because such moves are bad for confidence in the global monetary scene, overall. When the second most important currency in the world is looking so much under siege, it must badly affect other currencies.
Meanwhile over in China, the latest SGE withdrawal figures show withdrawals of 70 tonnes for the week ending Jan 16th, the third highest weekly figure ever in the run up to the February 19th Chinese New Year.
Markets and ETFs
New York closed Friday at $1,293.70 down $10.00. In Asia gold held that level, but in London the price dropped to $1,281 with the euro again weaker by a cent at $1.1228 down 1.00 cent against the dollar. The Fix saw the gold price set at $1,282.75 down $10.75 and in the euro, at €1,141.541 down €8.748, while the euro was almost unchanged at $1.1237. Ahead of New York’s opening gold was trading in London uncertainly, at $1,281.60 and in the euro at €1,140.77.
The silver price closed at $18.30 down 8 cents. Ahead of New York’s opening it was trading uncertainly at $17.93.
There were purchases of 1.195 tonnes into the SPDR gold ETF as well as a sale of 0.55 of a tonne from the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 741.646 and at 167.54 tonnes in the Gold Trust. U.S. gold investor’s eyes looked towards Europe over the weekend.
The silver price is starting the week wanting to fall quickly while the gold price is back below $1,300.