Greece back into the gold equation

Julian Phillips’ latest insights into what’s driving the gold and silver markets

New York closed Thursday at $1,181.50 down $4.70.  Today sees the dollar stronger at $1.1189 up from $1.1271 nearly a cent stronger against the euro with the dollar index stronger at 95.40 up from 95.03. The LBMA Gold Price was set at $1,179.25 down $1.25 with the equivalent euro price at €1,053.98 up €6.18. Ahead of New York’s opening, gold was trading in London at $1,181.10 and in the euro at €1,055.26.

The silver price rose slightly to $16.04 up 1 cent in New York. Ahead of New York’s opening it was trading at $15.95.

With the currencies continuing to react to the political situation in the E.U. gold is very steady as these currencies react to gold. In other words, currencies are moving against gold while gold continues to move sideways in London and New York. To make a move either way in significant terms will take an event, such as the departure of Greece from the Eurozone.

And today’s news of the day is, once again, Greece, as the IMF walks out of a meeting with Greece stating ‘serious differences’ with the Greek government. Statements that a ‘deal’ was imminent should be ignored from now on. The impression given by the actions of the IMF is that there will be no agreement before a default then Greece will have to settle its much reduced debt via classic Exchange Control regulations on a take it or leave it basis.

Essentially Greece is trying to gain an agreement with creditors on the basis that it is outside the E.U. already. A bankrupt Greece [there are no insolvency courts for nations] has a stronger hand than one begging for relief. As we have said many times before, Greece is already ruined as a debtor no matter what happens. It has nothing to lose by reneging on the debt. Remove that debt and Greece has a surplus. With a Drachma, it may be able to repeat what Iceland has done over the last few years [Iceland is now healthy financially]. History shows that a financially ostracized nation can recover.

On the other hand, the E.U. cannot accede to Greece’s demand or they will have to offer the same to other E.U. weaklings. So a ‘Grexit’ appears, right now, inevitable!

What we find surprising is that the euro appears to be rising on the expectation of a settlement and falling on expectations of a default. The loss of Greece‘s debt is a tiny matter for the overall E.U. so will not damage its financial standing. But the loss of such a weak nation from the E.U. will lead to a stronger euro, so the reverse should be happening.

There were no sales or purchases of gold from the SPDR gold ETF. The holdings of the SPDR gold ETF are at 704.225 tonnes and at 167.01 tonnes in the Gold Trust.

Silver is ready to be more volatile once gold starts moving. Regards,

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

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