Gold Surges As Greece Crashes - Eurozone Debt Crisis Part II Cometh

GoldCore's picture

Gold Surges As Greece Crashes - Eurozone Debt Crisis Part II Cometh 

Gold jumped 2.3 percent to a six-week high yesterday as sharp falls on stock markets globally led to renewed demand for gold as a haven.


Monday night and Tuesday saw renewed market turmoil across the world. Leading shares suffered their biggest daily fall since the middle of October, hit by renewed fears about the global economy and uncertainty in Greece following the announcement of snap presidential elections.

The FTSE 100 finished 142.68 points or 2.14% lower at 6529.47 yesterday as a combination of worries unsettled investors. Greece’s stock exchange crashed as the banking sector dragged the rest of the stock market down a staggering 13 percent, it’s most dramatic single-day decline ever. Greece is failing to exit its bailout amid uncertainty over its political future after the election news.

Meanwhile Chinese shares fell sharply in the wake of Monday’s disappointing trade data, showing a drop in imports, and a clampdown on its corporate bond market, while Japan was revealed to be deeper in recession than expected and the Nikkei was down 2.25 percent this morning.

The Shanghai Composite and Abu Dhabi’s ADX saw their sharpest falls since 2009. Wall Street joined in the global declines and stock markets lost $100 billion on Monday.

The already jittery market apparently balked at the shock announcement of Greek Prime Minister, Antonis Samaris, to hold a snap presidential election. If the government candidate loses it would pave the way for a general election in which the socialist Syriza party would be strong contenders.

Syriza say that they will renegotiate with the Troika and increase public spending which may put bondholders at risk. Britain’s Independent quotes Charles Robertson from Renaissance Capital warning that “a possible Syrizas election victory may force the Eurozone to choose between a fiscal union or the first euro exit.”


Greek Gold Stater Coin (323-281 B.C.)

Greece still has very high unemployment of around 25 percent and GDP has been wallowing since 2009 with a 1 percent rise in the cards for this year off a base that is 30 percent below 2009 levels.   

The attention being brought to bear upon Greece highlights once again the hollow nature of the “recovery” in Greece, Europe and the western world. The crisis is far from resolved - merely to use the very true cliche - kicked down the road. Well we appear to be coming towards the end of the road in Greece and this could set the stage for the next stage of the Eurozone debt crisis.

On cue, gold reacted to the global turmoil as it should, rising nearly 3 per cent, over $30 at one stage. Silver made even more impressive gains, rising 5.3 percent.

Despite significant headwinds in 2014, in form of surging oil prices, surging and record high stock markets and the end of the FED’s QE, gold has performed very well this year and looks to be in the process of bottoming.

Gold is 15.5% higher in yen terms, 13.2% higher in euro terms, 7.7% higher in sterling terms and has even made 2% gains in the “strong” dollar this year (see table and chart). This demonstrates once again gold’s benefit as a long term, store of value.   

Must Read:  7 Key Gold Must Haves


MARKET UPDATE
Today’s AM fix was USD 1,228.25, EUR 991.88 and GBP 783.82 per ounce.
Yesterday’s AM fix was USD 1,206.50, EUR 975.98 and GBP 770.98 per ounce.

Spot gold rose $24.60 or 2.2 percent to $1,229.60 per ounce yesterday and silver surged $0.66 or nearly 5 percent to $17.04 per ounce as renewed risk aversion leads to a flight to quality.


Gold in EUR - 1 Year (Thomson Reuters)

Gold in Singapore inched marginally lower today and that weakness continued in London trading. Gold remains near its seven-week high hit yesterday. A small rebound in equity markets and lower crude prices may have offset the impact of a weaker dollar.

Spot gold was down 0.3% at $1,229.90 an ounce in late trading in London The metal had risen to $1,238.20 yesterday, its highest since October 23.

Since November 7, gold has climbed nearly 10% from a four-year low. Japan’s massive QE experiment, China’s stimulus programme and signs that the ECB will increase money supply are again heightening gold’s appeal as a store of value.

Ultra loose monetary policies are set to continue despite the constant threat that the Fed may increase interest rates. As policy makers try to revive economies, major central banks will together add almost three times more liquidity next year than they did in 2014, according to Credit Suisse Group AG, as reported by Bloomberg.

Holdings of the SPDR Gold Trust, the world's largest gold ETF, rose 0.37% to 721.81 tonnes on Tuesday.

India, which accounts for about a quarter of global bullion demand, eased import restrictions on gold bullion, Finance Minister Arun Jaitley said today. The nation may change a rule mandating that “star trading houses” export all of their gold imports, Reuters reported today, citing an unnamed source.

Silver’s 5.3 per cent surge was the biggest gain since December 1. The price reached $17.23, the highest since October 29. Palladium rose 1.7 percent to $811.60 an ounce.

This year, gold is up 2.5 percent and palladium has climbed 13 percent while silver has slumped 12 percent and platinum dropped 9.2 percent. Silver has underperformed and looks very cheap relative to overvalued asset markets and indeed relative to gold and this is leading to robust demand for small coins and bars.


Silver in USD - 5 Years (Thomson Reuters)

The U.S. Mint has sold a record number of silver coins this year as demand for silver bullion helped silver recover more than 20 percent since falling to a five-year low early this month.

Purchases of American Eagle silver coins reached 43.051 million ounces in 2014, data on the U.S. Mint’s website shows. That tops last year’s 42.7 million ounces, the previous all-time high, according to an e-mailed statement yesterday. There are still enough supplies to keep selling 2014 dated coins through the week starting December 15, the mint said.

A surge in demand prompted the mint to suspend sales in November for more than a week because of a lack of inventory. When the coins were again made available for purchase, it was on allocated basis.

Buying has increased with prices heading for a second straight annual loss, the longest slump since 1992 and as silver buyers accumulate on price weakness and in anticipation of higher of prices.

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Chat_noir's picture

Gold is 15.5% higher in yen terms, 13.2% higher in euro terms, 7.7% higher in sterling terms and has even made 2% gains in the “strong” dollar this year (see table and chart). This demonstrates once again gold’s benefit as a long term, store of value.   

 

How much is it down in Euro terms or sterling term or usd terms since 2011 ?

This demonstrates once again gold's flaws as a short term, store of value. if you own it since 2011, its been burning your pockets faster than anything else.

TheRideNeverEnds's picture

I remember the last time this happened; the S&P went straight up for several years and several hundred points as anything tangible like gold oil etc went sharply lower.

Nothing like a good crisis to goose the market higher.

cobra1650's picture

No mention of gold increase on bloomfloater

franzpick's picture

Greek Prime Minister Antonis Samaras' attempted voting manipulation, and the ekathimerini.com corporate press b*llshit regarding their 1-day 13% market decline, is so thick you need wings to stay above it.

Take a daily look at national corporate newspapers in Greece, Venezuela, et al, to see the impending sovereign/corporate bond collapse that the U.S. corporate press doesn't want you to know about:

http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_10/12/2014_545318

Ghordius's picture

"Greek Prime Minister Antonis Samaras' attempted voting manipulation..." Ehm... do you have any evidence for that?

There is no voting going on, except in the Greek Parliament about the new Greek President. Because according to the Greek Constitution, it's Parliament that appoints the new President

How does Prime Minister Samara "attempt" to "manipulate" that? By... talking? You do realize that is called... politics?

Fact is that Samara's candidate is Stavros Dimas, and that SYRIZA is against that choice. If the Greek Parliament can't find the votes for a new president (it needs 200 out of 300 MPs, if I remember correctly), new popular elections for a new parliament have to be called in. It's that simple, and your "attempted voting manipulation" theory has no leg to stand on

Armed Resistance's picture

I just bought some real estate by the Parthenon- on the good side!

"Hey Wang, I think this place is restricted so don't tell them your Jewish."

disabledvet's picture

The gold to Chevy ratio looks good here. Ten ounces will get you a new one of those...certainly better than in the 90's.

The "gold to Ford Class Aircraft Carrier" isn't looking so good though. Still about a billion tons for one of those.

Oh, look! Sale at Penney's!

RaceToTheBottom's picture

The Gold to Twinkie ratio is more reliable.  

The Fatties are more important to the functioning of the gold buying public...

GFORCE's picture

Greece should never have taken the bailout but unfortunately sovereign interests had to give way to the unelected bureaucrats. We're all in now and it will end badly. http://otdon.blogspot.co.uk/

 

wintermute's picture

Ironically, Greece got very little from the multi-billion bailouts, most of the money went to the German, French, Italian and Spanish banks which had lapped up Greek sovereign, bank and corporate debt in the "good" years. The whole Greek bailout is a fig-leaf over a stealth bailout of European banks.

Arius's picture

why ironically?

 

wasnt it the game all along since Soros and Goldman showed up in Athens to start the games ?

 

what do you think these guys Siriza, samaras or whatever have any say in anything?  Peut etre ...

AdvancingTime's picture

Someday soon we might again start to hear about Greece thinking about leaving the euro. The Euro-zone is in a far bigger mess than recent headlines and figures suggest. Most of the growth in the Euro-zone over recent years has been in Germany and that bright spot is now under pressure.

Italy has been in recession for two years; France’s economy has been stagnant for months. Now that Germany is slowing many economist think the chances of a Japan-style deflationary spiral have risen sharply. Blame is being cast upon German policymakers that remain pigheadedly opposed to the stimulus the euro area wants, but what they need is serious reforms. Bottom-line and what it all boils down to is Germany can’t keep buying Greek bonds with German taxpayer money until the end of time.

 http://brucewilds.blogspot.com/2014/10/global-economic-malaise-due-to-debt.html

MarketWizard's picture

This is what happens when you choose to get off the bailout early, its not about $$$ they want to control Greece....They want to dictate policy that might be counterproductive to Greek interests..Greece offered to pay them back EARLY!!!!!

 

Just like a credit card they dont want you to pay them back they prefer lifelong indentured servitude..

TheReplacement's picture

You can be sure of one thing.  This has absolutely nothing to do with any Russian pipelines terminating at the Turkey-Greece border.  None whatsoever.