The Greek election result fallout will likely create significant waves in the gold market looking ahead – while there’s always the Ukraine to spice things up…
Perhaps predictably, gold initially jumped up to the $1,300 level in Asian trading as the Greek election results became apparent. But as the news, which had been largely anticipated, began to be assessed the gold price fell back fairly sharply in London trading.
Analysts at Commerzbank put this down to ‘buy the rumour and sell the fact’ profit taking, but with the aftermath of the election result still to really impact, one suspects that the likely forthcoming very difficult negotiations between the new Syriza government in Greece and the EU/ECB and the IMF over renegotiation of Greek debt will create some significant waves in the gold market ahead.
Initial indications are that the IMF, and probably the Eurozone nations led by Germany, will strongly resist any Greek attempts to renegotiate and write-off much of its debt. IMF MD Christine Lagarde, for example, seems to be taking a hardline approach. “A debt is a debt,” she is reported as saying. But how much this is setting out an initial negotiating position ahead of the inevitable horse trading remains to be seen.
If all this results in deadlock then there is a strong likelihood that Greece will default on its debt as soon as this summer with the possibility it will be ejected from the Eurozone by the other members who may have had enough of the already huge costs of trying, unsuccessfully, to support the Greek economy and bring it back on track. The Greek Syriza point of view is that with the huge debt overhang it will be impossible for the Greek economy to recover for years, if not decades.
But Syriza itself may not have an easy internal ride. It appears to be agonisingly short, by one seat, of an overall majority in the Greek parliament and has had to enlist an unlikely coalition partner in Independent Greeks – a right wing party which has little in common with the radical left wing Syriza apart from the ending of the austerity measures which have so devastated the Middle and Lower classes’ incomes and generated huge unemployment – particularly among the under-24s.
Syriza itself is also something of an unholy alliance of Marxist far left across to some with almost Centrist viewpoints, but again all opposed to the austerity measure imposed on the nation as a condition for past bailouts and put in place by the now defeated New Democracy party which controlled the previous administration.
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