After a 61% “No” vote in this weekend’s referendum, the Greek people have given a vote of confidence to their government to continue drawing a hard line in negotiations with their creditors in Europe. In order to facilitate further discussions, polarizing finance minister Yanis Varoufakis has announced his resignation, though Jeckyll-and-Hyde prime minister Alexis Tsipras remains at the helm.
Interestingly, the reaction in Europe was muted; although most of the continent’s stock indices opened in the red this morning, the euro remained steady, holding above $1.10. The dollar was slightly stronger at 96.45 on the DXY, keeping gold and silver flat at this morning’s open while platinum (-$36) and palladium (-$25) lagged behind. U.S. stock index futures tracked lower with their European counterparts on the uncertainty still surrounding Greece’s future.
Yesterday in the Markets
U.S. markets were closed on Friday for the 4th of July holiday weekend. The metals were mixed while the crude oil benchmarks each lost about 1%. The Shanghai stock market continued its 3-week rout, losing another 5.8% for its worst 3-week stretch since 1992.
Factors Affecting Gold Today
German Chancellor Angela Merkel and French President François Hollande will meet on Monday and Tuesday to formulate a political gameplan now that Greece has now popularly rejected the creditors terms for a potential bailout. Though Europe may be fairly well-insulated from a Greek contagion, the further the situation deteriorates, the less viable the euro area seems as an economic entity.
Although the “No” vote in the plebiscite would indicate that the next move must be made by the Greeks, the fact also remains that the ECB will have to provide some assistance to the country in the depths of a full-fledged banking crisis. Expect the can-kicking to continue until a more amiable political solution can be found—but one involving new leadership in Greece is now far less likely with the “No” vote. U.S Treasuries, the Swiss franc, and the precious metals will undoubtedly be the beneficiaries of the safe haven flight that accompanies the unraveling of Greece’s economy.
Stirring up more global strife, China is throwing its hat into the Iran nuclear negotiations, urging a deal to be reached as the extended deadline for the talks falls this week. At this point, perhaps China’s strategic and regional alliance with Iran will help steer negotiations toward a resolution.
At the same time, the country is struggling to keep its equities market afloat after enduring a painful correction of more than 20% since mid-June. The government has intervened in the stock markets to try and keep mainland shares from selling off even further. Though Shanghai added 2.4% on Monday, more than two stocks fells for every one that advanced. Much of the Communist government’s motivation is that a particularly bad losing streak for stocks, especially after hitting such highs, would erode confidence and trust in the establishment.
Tomorrow sees the JOLTS (Job Opening and Labor Turnover Survey) report come out, along with the latest international trade (trade deficit) figures.