Even with the continued high-wire act Greece is trying to pull off with its European and international creditors, American investors across the Atlantic seem fairly confident that the U.S. markets will remain largely insulated from any spillover from the situation blowing up in Europe. The dollar has been gaining against the euro as the scenario remains fluid, causing funds to flow out of euro-denominated assets into those measured in USD. This has held down gold prices, which opened Wednesday about $12 per oz lower at $1,170/oz.
All eyes will remain on Greece for as long as the impasse drags out; with European banks and investors shedding their exposure to Greece ahead of the national referendum on the country’s next move with creditors, it’s only a matter of time before Greece crumbles and defaults, even with deposits secured through capital controls. If nothing else, Greece has lost the trust of its negotiating partners, which all but seals the end of discussions.
Yesterday in the Markets
Global markets didn’t respond acutely to the Greek debt situation, with only a few key European indices in the negative. The euro fell back to about $1.115 but made no major moves with the situation in the eurozone still cloudy. The dollar gained on the DXY to 95.5, suppressing gold prices in terms of USD. Gold and silver both fell about 0.5% yesterday, while platinum was essentially flat and palladium added $6 per ounce. U.S. indices closed on positive territory, though were all about 2% in the red for the month of June. The crude oil benchmarks each posted solid gains with the Iran talks being pushed back one week.
Factors Affecting Gold Today
Greece may be buckling now that PM Tsipras has, at the last minute and after already calling for a national referendum that is a de facto decision about the country’s membership in the euro, again come close to accepting a modified version of creditors’ previous proposal. EU finance ministers have pushed back a late-night conference call for Wednesday to try and leave the door open to reach an agreement, although Syriza has essentially made its bed already: German Chancellor Angela Merkel was adamant that no further negotiations would take place until after the July 5th referendum vote.
As it relates to action in the precious metals prices, the Royal Mint says that Greek demand for Gold Sovereigns (which are typically sold at Greek banks) doubled in June from their previous 5-month average. Clearly there’s a flight to safety with the potential worsening of the crisis in Europe, and it tells us something that those closest to the problem are choosing physical gold. Silver tracked lower with gold this morning to $15.65/oz, while platinum was mostly flat. After being battered over the past month or so, palladium jumped more than $20 on Wednesday back to about $700/oz.
Besides Greece, the U.S. territory Puerto Rico is mired in its own debt-default scenario, with a mounting debt of $72 billion currently outstanding. The island’s governor has gone on record as calling the debt load “unpayable,” setting up another possible headache in the financial markets. However, as a U.S. protectorate, Puerto Rico technically cannot default. (Keep in mind that Greece can technically not leave the euro, either.)
The nonfarm payrolls and unemployment data will be released tomorrow morning. Weekly jobless claims also come out, along with factory orders.