Greece defers IMF payments while gold suffers

By Julian Phillips

New York closed at $1,177.00 down $16.40 against Wednesday’s close as there were very thin volumes being traded. Today sees the dollar slightly firmer at $1.1226 down from $1.1126 against the euro with the dollar index weaker at 95.67. The LBMA Gold Price was set at $1,175.90 down $11.10 and the equivalent euro price was €1,047.11 down €14.72. Ahead of New York’s opening, gold was trading in London at $1,173.20 and in the euro at €1,044.84.

The silver price rose slightly to $16.18 down 61 cents in New York. Ahead of New York’s opening it was trading at $16.16.

Thin trading was the main feature of the day in London and New York. In such an environment prices become extremely volatile and can move both ways quickly often reversing just as quickly. Volatility is paramount. The currency moves were sidelined as gold and silver fell in all currencies. The fall seems frightening as support at $1,180 has been breached. But readers should note that in such thin trading the Technical indicators may not be as reliable as they should be.  In such markets, one would be foolish to go firm on a future direction for silver and gold in the short term.

The main feature of the day for gold remains Greece as it postponed the repayment of €300 million until the end of June along with other payments due before then. This adds tremendous leverage to the ‘horse trading’ between the E.U. and Greece.  Despite reassurances that a deal was ‘close’ this move tells us that the situation is quite different. Now we wait still more, realizing that unless the E.U. agrees to the terms of Greece, they will hold a general election or referendum for permission to leave the E.U. and euro. Any funds they do have for repayment will not be repaid. With a default then a reality, we expect the Greek government to issue its own schedule of repayments.  We believe that unless the E.U. backs down there will be no agreement and the euro should go stronger as the main weak link in the E.U. is done away with. But then, expect great currency volatility across a group of currencies.

In the past two days we have not seen sales from either the SPDR Gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are at 709.891 tonnes and at 166.71 tonnes in the Gold Trust.  We remain in ‘no widows or orphans’ territory. So, one may well ask what made prices fall so far? Dealers can and do protect themselves from sellers by marking prices down. The reverse is also true when dealers want to protect themselves from buyers by marking prices up too. This combined with small sales will trigger such behavior.

Silver remains riveted to gold in good times and bad and will continue to do so. We do, however expect the silver price to show even more volatility than the currently volatile gold price in thin markets.

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

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