– Greece warns may default on IMF loan next week
– Greek bank runs continue and deposits flee
– German Bundestag votes for bailout extension
– Syriza agree to a bailout extension of four months, in return for concessions yet to be approved by the EU
– Questions over Syriza negotiating a weak deal despite its strong position
– Greece and EU buying time to arrange orderly “Grexit”?
– Greece has printing presses poised to print newly designed Greek drachmas
– Greeks buying gold bullion
The Euro Working Group discussed Greece’s imminent funding problems yesterday amid mounting concern about how the country will meet its massive obligations.
Minister of State for Coordinating Government Operations, Alekos Flambouraris, suggested yesterday that Greece might delay payment to the IMF if it cannot find the necessary money. Greece is due to pay the IMF 1.6 billion euros next month but the Greek Minister said that Athens might ask to delay this payment for two months.
Kathimerini reports that “the possibility of Greece postponing the repayment of any debt tranches to the IMF is seen as “exceptionally complicated” with “many obstacles,” according to officials “familiar with the subject”. They stress that such a move would constitute a “clear default,” with consequences for a large number of other loans Greece has received.”
Yesterday the Bank of Greece presented its latest, January, bank deposit data and it shows bank runs continue in Greece. There was a record €12.2 billion monthly outflow of deposits. This is greater in absolute and relative terms than anything experienced during any of the previous Greek crises and bailouts.
The total amount of Greek corporate and household deposits has now tumbled to just €148 billion. This number is in line with some of the more pessimistic expectations, and brings the total cash holdings at Greek banks to the lowest level since August 2005.
Separately and not surprisingly, the German parliament has approved the bailout extension by a large majority in the Bundestag.
The announcement last Friday that Greece would after all adhere to an extended bailout program was viewed as a capitulation by Syriza and a triumph for Germany and the Eurogroup.
The statement, which simply reaffirmed the existing program, substituting some unpalatable terms with euphemisms – Troika is referred to as “institutions,” for example, has sparked dissent within Syriza itself and the first violent protests against the new government outside the Greek parliament were seen yesterday.
We consider it odd that Greece should have folded while its hand was so strong. Greece could push the EU to the brink. From the point of view of Syriza’s electorate, things cannot get much worse anyway.
Ultimately, Greece could get its bridging loan from Russia or the BRICS bank so why should Syriza buckle and face national humiliation when it did not need to. We suspect a larger game is afoot.
Some analysts have suggested that the EU and Greece have reached a stalemate and are preparing to attempt an orderly exit by Greece from the Euro and back to the Drachma.
This may certainly be the case. Greece has newly designed Drachma notes (see above) and printing presses waiting for the order to start rolling.
Where all this is leading is anyone’s guess. If it is a simple case of Syriza being out-smarted by its EU partners it can only lead to social unrest in Greece and a possible rise of the fascist Golden Dawn.
At any rate, Greece is bankrupt with no hope in sight, at least within the Euro monetary union, so eventual default appears inevitable.
If Greece and the EU have agreed to disagree there is no guarantee that the process will be orderly despite the best intentions of both sides. If it is achieved it will open the door for other peripheral nations to follow suit, each exit process a mine-field.
Greeks have been accumulating physical gold in recent months in anticipation of bank holidays, possible bail-ins and indeed a possible return to the drachma.
Despite the last minute Greek debt deal, we are continuing to see demand from Greece including demand from companies and some high net worth buying.
Demand in January and so far in February has been very high with dozens of new accounts opened and purchases valued in the millions. Many of the new Greek clients said that these were not one of purchases, as is often the case, rather initial purchases, with a view to buying more in the coming months.
We have clients in over 40 countries but Greece saw the greatest increase in demand in January and this has continued into the end of February. In demand are gold sovereigns and bars – some for delivery but more for storage, in Zurich primarily.
British sovereigns remain the traditional favourite of Greek investors and the Bank of Greece continues to see very high demand for sovereigns in Athens.
Millions of euros worth of demand for gold is small vis a vis other assets but it is a large increase in terms of physical gold demand – especially as it came from a very low base – Greek demand was quite low last year.
Concerns about bank deposits and the ‘Grexit’ remain and lingering doubts about the long term outlook are leading to continued safe haven demand.
The Greek situation is far from resolved and the euro is still in peril. Today came news that the Irish government has contingency plans for the collapse of the euro including a return to the Irish national currency – the Irish punt. This is something we said was likely to be the case and we were attacked as “scaremongering.”
The truth can be a scary thing sometimes … especially for those who put their head in the sand and ignore it.
Owners of physical gold will be protected should we see a reversion to national currencies and or further currency devaluations in the ongoing currency wars.
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Today’s AM fix was USD 1,205.00, EUR 1,073.59 and GBP 782.77 per ounce.
Yesterday’s AM fix was USD 1,220.00, EUR 1,073.66 and GBP 785.58 per ounce.
Gold climbed 0.32% percent or $3.80 and closed at $1,208.40 an ounce on yesterday, while silver remained unchanged at $16.54 an ounce.
Gold and silver are set for gains in all currencies this week after losses in February – losses which reversed some of the initial 2015 gains in January.
Gold in euros has retreated in February, after posting its biggest monthly rise in 17 years in January. Gold in euro is down 5.5% on the month – the biggest monthly drop in over a year.
Gold in euros appears to have found pretty strong support at the 50-day moving average (at €1061 currently) according to analysts in the Thomson Reuters Global Gold Forum.
Gold in dollars edged downward in early morning trading in London, hampered by a stronger dollar and traders taking profits on gains seen this week. Gold in Singapore was up 0.2 percent at $1,210.80 an ounce near end of day trading. In late morning trading in London the metals group are all marginally lower.
Gold is $1,206.10 off 0.33%, silver is $16.47 off 0.77% and platinum is $1,172.96 off 0.36%.
Chinese demand remained robust this week and again overnight which is supporting gold at these levels. As is the more dovish noises made by Fed Chair Janet Yellen on Wednesday.
China plans to start their own benchmark yuan denominated gold fix that would come from a new 1kg contract to be launched at the government run Shanghai Gold Exchange (SGE) a source told Reuters. The SGE only opened in the city’s free trade zone in September 2014 and allows foreigners to trade yuan denominated contracts.
The world’s biggest gold buyer will further influence the pricing of the precious metal and appears to have designs on becoming the world’s leading precious metals hub.
India’s demand for gold was only average this week as buyers in the world’s number 2 buyer of the metal held off purchases ahead of an expected cut in import duty. But dealers are expected to increase their demand, if the import duty is lowered from a record 10 percent in Saturday’s federal budget.
India may announce a cut to their import duties in their annual budget to be published tomorrow. Some analysts put the cut on the gold duty at 2 to 4 percent from 10 percent. Another positive gold factor.
U.S. economic data to be released today are the important GDP figures, The Chicago PMI, pending home sales and the University of Michigan’s consumer sentiment and inflation reports.
Poor numbers and a higher than expected inflation number should see gold make gains. Better than expected numbers could see gold come under selling pressure.
Earlier this week Switzerland’s competition commission said it was looking into possible gold and silver manipulation, and the Wall Street Journal reported the U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) were investigating at least 10 major banks for price rigging of precious metals markets.
The last thing insolvent banks and governments want are surging gold and silver prices.
Perverted and ‘unfree’ markets create profound risks to financial systems and economies for all investors and savers. They also present opportunities.
As ever, it is prudent to be on the opposite side of official manipulation as ultimately the free market forces of supply and demand will always win out.
This was seen recently when the Swiss franc peg broke resulting in the franc surging 40% in 13 minutes. The same will likely happen to precious metal prices when the manipulation of banks come to an end – likely through the power of the physical demand of 3 billion people including high net worth and central banks in Russia, India, China and Asia.
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