Gold News

Gold Price 'Does Nothing' on Greece's 'Resounding No' Referendum Vote, Selling Hits 'Logical Reaction'

GOLD PRICES failed to hold an early 1.7% spike against the Euro in London trade Monday, after the Greek referendum surprised pundits and politicians with a resounding "No" to the austerity and repayment demands of Athens' international and Eurozone creditors.
 
Priced in Dollars, gold moved in a $10 range around $1170 per ounce.
 
Euro gold prices spiked to €1066 as the 19-nation currency sank at the start of Asian trade following Sunday's Greek referendum, but then slipped back to last week's level of €1050 before edging 0.5% higher.
 
European stock markets meantime lost 1.5%, but US shares slipped only 0.5% at Monday's open as major-economy government bond prices jumped.
 
US crude oil contracts sank almost 5% per barrel to trade below $55 for the first time in 3 months.
 
"[Sunday's] unexpectedly resolute 'No' vote has increased the chances of Greece leaving the Eurozone," says today's commodities note from German investment and commercial bank Commerzbank. 
 
"Yet there has been virtually no reaction from the gold price."
 
However the politics now unfolds, reckons US brokerage INTL FCStone in a note, "We think that the short-term uncertainty generated by the Greek vote will likely benefit gold and suspect that we could see more appreciation over the next few days."
 
But "Gold's 'safe haven' appeal is clearly out the window," counters China-owned bullion and investment bank ICBC Standard Bank, "as any logical reaction to [gold's overnight] rally continues to run into scale up selling.
 
"Selling interest brought prices right back to the €1050 anchor."
 
Looking at the political and puntits' reaction to the Greek referendum, "The resounding 'No' vote is incompatible with opinion poll findings that most Greeks want to stay in the Euro," reckons former UBS economist George Magnus.
 
Congratulations for the 61-to-39% victory for 'Oxi' today came from the left-wing leaders of Venezuela, Cuba and Bolivia, as well as from recent debt-defaulter Argentina.
 
Within Greece, claimed German MEP Manfred Weber, it was " worrying that it's mainly radical parties (far-left & far-right) that are celebrating [this] outcome."
 
" Democracy matters more than any currency arrangement," wrote Keynesian US professor Paul Krugman on his New York Times blog.
 
"We are in a difficult situation," said Martin Schulz, president of the European Parliament – and "chief bully boy" according to UK anti-Europe MEP Nigel Farage – because "eighteen other states of the Eurozone agreed about the proposals to which the Greek people said 'no'. 
 
"Democratic governments and parliaments in other countries had another view, a different view."
 
Spain's economy minister Luis  de Guindos said Athens had the right to ask for a 3rd bail-out from its Eurozone partners – a view stated in March – while fellow bailed-out Euro member Ireland had "always [felt] debt reprofiling would be part of [a Greek] agreement," said Dublin's minister for European Affairs Dara Murphy, contradicting what Irish taoiseach Enda Kenny said only a fortnight ago
 
"Germany is the country that has never repaid its debts," says French economic historian Thomas Piketty, interviewed by Die Welt and pointing to Berlin's own debt forgiveness enjoyed after the first and second world wars.
 
"[Germany] has no standing to lecture other nations.”
 
Greek finance minister Yanis Varoufakis meantime surprised analysts early Monday by resigning his post, despite the referendum win for Syriza's view – a move apparently aimed at placating Athens' creditors so that prime minister Alexis Tsipras can begin renegotiations in Brussels on Tuesday.
 
"Amidst all this," notes Japanese conglomerate Mitsubishi's analyst Jonathan Butler, "gold has done very little [and] has performed disappointingly as the Euro clawed back its initial losses against the Dollar.
 
"[But] volatility in gold could increase from the currently rather subdued level as the crisis drags on."
 
Stock markets in China meantime soared 8% and then fell back to cloose only 2.5% higher on Monday after Beijing moved to stem the last month's near one-third collapse in equity prices by banning any sales below a certain points-level, forcing the creation of a $19 billion "stabilization fund" financed by 21 major brokerages, suspending all new share IPO flotations, and promising "liquidity support" to financial intermediaries.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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