No solution has been reached yet for the Greek debt crisis and this grid-lock could continue for the next few weeks as it’s usually just in the final few hours before a deadline a solution is reached. A nice strategic chess game is currently going on and some sort of agreement will eventually be reached and then it will be interesting to conduct a damage control assessment on the other Eurozone-members.
The Greek citizens aren’t really looking forward to any ‘solution’ and have been buying gold ‘en masse’. Even though the Central Bank of Greece said it hadn’t noticed an increase in demand for gold coins (but let’s not even start to discuss the veracity, reliability and credibility of the Greek central bank at this point), a spokesperson of the UK Royal Mint said there definitely was an uptick in the demand for precious metals from Greek buyers.
But wait, we should have a look at the CBG’s statement that there was no demand increase. According to the official numbers from the Greek Central Bank, it sold almost 5,900 golden British Sovereigns in January whilst it sold a total of 7,857 coins in Q4 2014. If we would extrapolate the 5,849 coins in January, we would end up with a quarterly sales rate of 17,500 coins, or more than TWICE the sales for Q4 2014. That’s a 123% increase, but the central bank is stating it hasn’t seen a noticeable increase. Maybe their and our definitions of ‘noticeable’ are different, but if the demand for gold suddenly more than doubles, we wouldn’t really describe it as ‘no change’.
Despite finding it interesting to see a jump in the demand for Sovereigns (which generally carry a higher premium than the more popular Canadian Maple Leaf or South African Krugerrand), it’s excellent to see at least some of the Greeks are starting to realize it’s not too late (yet) to protect their assets and purchasing power. As you can see on the next chart, the gold price expressed in EUR is still up by approximately 11% in the past 2 months, compared to just 2% expressed in USD.
The Greeks are in a catch-22 situation. If they remain in the Eurozone the pressure on its economy will remain, but if the country leaves the currency block, the reinstatement of the Drachme would destroy the capability to import necessary goods. In both cases gold will be a viable alternative to safeguard a person’s net value. It has been proven the central banks aren’t keeping people’s best interests at heart, so the best way moving forward is to have your own little central bank with a percentage of your net assets being backed by physical gold (and silver).
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