Greece: Between a rock and a hard place

Julian Phillips’ latest take on the gold and silver markets and the Greek financial crisis.  The financial community seems to think Greece will back down and compromise, hence today’s gold price weakness - Julian doesn’t agree!

New York closed yesterday at $1,207.4 down$1.10. London Fixed the gold price this morning at $1,203.50 down $3.00 and in the euro, at €1,061.381 up €2.025, while the euro was half a cent weaker at $1.1339. Ahead of New York’s opening, gold was trading in Lo The silver price closed at $16.39 down 12 cents. Ahead of New York’s opening it was trading at $16.42.

There were purchases of 1.194 tonnes into the SPDR gold ETF but none into the Gold Trust on Thursday, as gold prices are now solidly under the influence of gold markets outside China. The holdings of the SPDR gold ETF are at 768.263 tonnes and at 167.03 tonnes in the Gold Trust.  So far, in the absence of Chinese gold demand, the gold price is holding above support at $1,200. We are still of the opinion that physical activity will dominate, while traders and speculators try to push the price around. But even they appear loath to break support as they are aware of the influence the E.U.-Greek situation could have on the gold price and currency markets.

The Silver Trust is again seeing buyers of its shares after weeks of sales. But while this is a good gauge of professional silver investor’s opinions, we see that they are not enough to influence the silver price, which remains tethered to the gold price.

As to Greece, Germany rejected Greece’s proposal. We expect today’s meeting of governments in the E.U. to do the same. The Eurozone believes that Greece will back down. We see the Greek Prime and finance Ministers on a somewhat Messianic quest, in

their minds, so will not accept any lesser proposal than the one they put forward. Maybe we are a trifle cynical, but we believe both sides are fully aware of the next step and have decided to accept it. Perhaps on Monday when you read this market report, you will be seeing tremendous volatility in global financial markets as a result!

In our current issue of the Gold Forecaster, we detail the types of Capital/Exchange Controls that may be implemented in Greece, which within a few years we see a very different Greece than the one we are seeing now.  Maybe you should be ready to book a pretty cheap holiday there soon?

What is very pertinent to the long-term gold price is the Fed’s reaction to problems outside of the U.S. and their impact on both the dollar and on the U.S. economy. Many feel that the U.S. is nigh on immune to outside financial problems, but the Fed doesn’t think so! Nor do we!

Julian D.W. Phillips for the Gold & Silver Forecasters -  and

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