From the Trading Desk
Greece is back in the headlines and there is optimism that Athens will accept a new proposal from creditors. Eurozone inflation rose for the first time in six months while US factory orders unexpectedly fell in April. The combination of these headlines has the euro up nearly 2% today, having moved solidly through previous resistance at 1.10. Gold has had a disappointing reaction to the weaker USD today and is up a paltry $3. After ultimately failing to hold above $1,200 yesterday, it feels like gold wants to test lower.
Physical demand remains weak. The SPDR gold ETF continues to shed ounces and holdings now hover right around lows last seen in January. In Turkey, gold imports have slid to a 10-month low because of the price surge in the lira. Coin demand in the US is bleak which is best exemplified by the US Mint removing an allocation cap to distributors on silver eagle orders.
It’s all about the dollar as I have been saying for in many recent Current Thoughts. Today was a good indication on how gold and silver trade inverse, but it was the miners that had the better inverse play today. Still, as little as the move up was for gold and silver, they look like they might want to continue higher for a bit.
The only thing that would change this is any economic data that would come out to support a stronger dollar. Meanwhile, looming for the Euro is the Greece situation. Please read; Greece scrambles to avoid default as deadline nears
Gold and silver are both down a hair in after hours trading. I lean a little bullish on them but this Greece situation trumps everything. If, and this is a big if, they can somehow resolve the situation in Greece, this could lead to the good summer months I have mentioned a few times as the dollar takes a breather. This could possibly occur till the end of summer. Then gold would fall to it’s lower lows. But there is so much speculation in this paragraph and I would rather not speculate but trade what is in front of me. The Greece situation is hopeless. But the market doesn’t ignore the band aid’s holding together the debt situation in Greece. The band aid’s won’t last as the wound is too deep.
What this does show however are the signs of what’s to come in many nations. The only asset that can insure your country’s looming fiscal crisis is gold. While this may be dollar bullish for gold because so many other countries are in deep Debt to GDP trouble, there is only so much gold and silver to go around. But for now, as the first paragraph of these Current Thoughts says, there is plenty of metal available and without demand there is pricing pressure.
We need fear, demand, failures and some idea of what gold really represents for your portfolio, along with an understanding of asset allocation and then sit back and watch the show. For now, lets see what the Greece situation brings.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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