The melodrama in Greece remains fluid, as a new proposal on economic reforms has been submitted to the country’s creditors for review. In addition to providing all of the comedy and suspense of a Greek tragedy, the debt saga has also taken an ironic turn: as the two sides near a deal, it appears the very measures that the Greek voters rejected by voting “No” in last week’s referendum will, in fact, be put into place. How long it takes this reality to unravel the political capital of Prime Minister Alexis Tsipras and the Syriza party is still up in the air. The Sunday deadline for an agreement looms. Nonetheless, markets responded positively to the closeness of a new deal for Greece, with U.S. indices pointing higher at this morning’s open, while the precious metals also made modest gains.
Yesterday in the Markets
U.S. shares moved lower on Thursday but, thanks to a jump at the day’s open, closed relatively unchanged from their previous levels. 10-year treasuries fell, sending yields higher to 2.38%. Silver made modest gains while gold was largely unchanged; the Platinum Group metals slid back further.
Factors Affecting Gold Today
Some fear is abating about China’s stock market, as Shanghai bounced back in earnest the past two days, adding more than 4.5% on Friday. Even so, the depth of the problem in China may have far worse ramifications than the soap opera between Greece and Europe. Over the last several weeks, the Chinese stock market was wiping out wealth equivalent to the size of the entire Greek economy on an hourly basis. The numbers about the losses are staggering, with $3.9 trillion in value vanishing amid the sell-off.
Though some (such as the Chinese government) will insist that the panicked flight out of Chinese equities was merely the result of some external factors, like the spread of malicious rumors, the fact remains that any subsequent recovery for the markets ought to be viewed with skepticism, as the Communist Party will take any actions necessary to keep the stock markets propped up. This sort of state-sponsored backstop can’t function correctly in a free market, however; at some point, the administration—and traders increasingly losing faith in their government—will have to deal with the fact that the markets only go up when it is the one buying shares.
Between the bounce in Shanghai and renewed hopes in Athens, the global markets were solidly in the green this morning, with Europe’s main indices leading the way more than 3% higher. The dollar was more than 1% lower this morning, helping the yen, pound sterling, and euro each post solid gains against the currency. The crude oil benchmarks looked to rise off of recent lows, with WTI just below $53/bbl and Brent at about $58.75/bbl.
Around 10 am EST, the precious metals were each in positive territory: Gold: $1,160/oz (unchanged); Silver: $15.55/oz (+7¢); Platinum: $1,035/oz (+$6); Palladium: $658/oz (+18)
Monday will be a pretty slow day of new data and news, with the Treasury budget (budget deficit) for June released during the afternoon.